Health Reform: Changing the Insurance ModelAt 18% of GDP, health care is too big to be revised in one step. We advise collecting interest on the revenue, using modified Health Savings Accounts. After that, the obvious next steps would trigger as much reform as we could handle in a decade.

Second Edition, Greater Savings.The book, Health Savings Account: Planning for Prosperity is here revised, making N-HSA a completed intermediate step. Whether to go faster to Retired Life is left undecided until it becomes clearer what reception earlier steps receive. There is a difficult transition ahead of any of these proposals. On the other hand, transition must be accomplished, so Congress may prefer more speculation about destination.

History Footnote: Before the white man came, the Iroquois "nation"devised rules still characteristic of our modern political parties. At various times, there were five, six, or seven tribes in the Iroquois confederacy headquartered in upstate New York, allied to each other with fluctuating loyalty. Philadelphia's tribe were Delawares, or Leni Lanape; but the most warlike and dominant tribe were the Mohawks. Confederations work best when allied against a common foe. The rest of the time, member tribes mostly beat and cheat each other.

The Philadelphia Democratic Party appeals to a number of minority groups and recent immigrants, but it is more meaningful to think in terms of players. For example, university professors are mostly Democrats, but the teachers union is an active political player. Minorities generally vote Democratic, but the Black Ministers are players. Lawyers are rather evenly divided between Republicans and Democrats, but Plaintiff Trial Lawyers, the ones who sue people for a share of the award, are players.

Some people are players but keep it quiet. Certain rich donors are players but don't want to be known as such. The chiropractors and optometrists claim to be players but would rather not have the truth known. The news media and utility companies come close to denying they are players in spite of abundant evidence otherwise.

Well, the local players had a war dance just before the November, 2005 elections; the timing was no accident, and it was publicly described as a SEPTA contract negotiation. The issues had mostly been settled in advance, but the real deal-breaker was health benefits, Blue Cross health insurance paid by the employer to escape income tax and to make the pay packet appear smaller to the taxpayers. Step by step for twenty five years, employers in the form of the Republican politicians had been keeping up a steady drumbeat, trying to reduce the incentive to overspend health insurance because it seemed free, with resulting increase in employer costs. Slowly, business management convinced a majority of the public that "first-dollar coverage" was a villain, since the person covered by the insurance has no skin in the game. Even party loyalists had to admit that it looked as though the tax exemption of health insurance was injuring the image of labor. That concept carried the slogan of "sending jobs to China", or killing the goose that lays golden eggs in the Rust Belt. Five million Health Savings Accounts were sold in 2005 in spite of state laws hampering this form of health insurance, and from experience it seemed certain that five times that many would be sold if early-adopters reported satisfaction. The surrogate was deductibles and employee contribution to health insurance; just about everybody recognizes the need to make some token contribution to health insurance in order to have skin in the game and keep costs down. But not the SEPTA workers. In 2005, the brotherhood of Septa workers would go on strike for fifty days rather than pay one penny of "give-back" for health insurance. Their energy level was high, they were waving their arms, they were ready to overturn ashcans.

Bellevue

When union contract negotiations go on for days, all day, the public gets an idea the negotiating table is a shouting match the whole time, with "negotiators" carrying on with tom-toms and tomahawks in an even more physical and extreme model for their supporters on the street corners. For about ten minutes a day, that's true. But then the television people can turn off their lights and the war hawks fan out to talk with their supporters outside the room, which in this case happened to be in the Bellevue Stratford Hotel. Perhaps you didn't know the Pennsylvania Governor has quite a nice set of offices there. Perhaps you haven't noticed that all the parking spaces on the side alleys near the Bellevue "belong" to various politicians. Just try parking there yourself to learn a few facts of Philadelphia life.

In negotiating classes, they teach you never to make the first concession. By that reasoning, no negotiation would ever end. The more practical advice is to forget about any serious bargains until the last day of the contract, or even a couple days after that. The hard reality is that no one will make a concession while there is time for some invisible player to back out; no one wants to give his constituents time to realize he has sold out their trust, or violated their loud, insistent, wholly unrealistic demands. And so in 2005, after the shouting had gone on for some time, and even a real strike began, the Governor finally sauntered into his nice Philadelphia office. Time to get to work.

Ed Rendell

Those who didn't know him made the comment they could almost believe he was a victim of Attention Deficit Disorder. He talked all the time, moved all the time, and apparently showered all the time. That is, he was in and out of sight all night, but invariably reappeared with fresh shirts, clean shaves and sharp creases. His aides confided he wasn't very good at "detail work", which is to say he conducted the whole affair on a primeval level of dominance, bluster, charm and implied threat. Don't bother me with facts. Mayor Street, on the other hand, would come in and mumble something incoherent, and then had to leave for an important engagement. Word came in that the school teachers felt they really had to pay a small health insurance deductible, and it wasn't so bad. Foo, no guts.

Somewhere along the line, the newspapers started to echo that deductibles had their merits. Foo, bunch of Communists. The black ministers were reported to feel that if their people all had to pay deductibles, why couldn't the transit workers. Bah, bunch of muddleheads. In the hubbub, someone asked what Andy Stern thought. The trial lawyers didn't have as much to say as they once did; SEPTA had reduced liability costs by $87 million through adamantly refusing to settle any case without going to court. Paper tigers. What about chiropractic benefits, we demand the inclusion of chiropractic benefits. No, said SEPTA, we aren't going to agree to any of that sort of thing. Well, what about twenty visits a year to chiropractors?

One by one, the other players deserted the SEPTA workers. The message from the other tribes in the confederation seemed to be, get what you can for SEPTA, but stop the strike by election day. The Governor produced the razzle-dazzle, a loan to the city to pre-pay the Blue Cross premium, in return for which Blue Cross would reduce the premium. The effect of that was to produce enough cash to appear to add ten cents an hour to the pay packet. We'll have to wait a year to see how this money gets restored to Blue Cross, but that's the general idea.

The strike was over, hurray. The next day, the Democrat party elected Democratic governors in New Jersey and Virginia, defeated some California amendments which would have hurt the trial lawyers and teachers unions. Surely, someone in the Democrat party nationally was telling himself that caving on the Philadelphia transit strike was a small price to pay for that.

Everybody ends up getting fired in a recent book by John Kastor about recent events at the University of Pennsylvania just like everybody ending up dead in an Elizabethan play. The vital difference, of course, is that the dramatis personae at Penn can still relate to a bewildered audience their own versions of those grand events. To protect himself, the author peppers his book with more footnotes than a Ph.D. thesis. And thousands of stakeholders at the University can now realize that during those eventful times they were as clueless as Rosencranz and Guildenstern.

One basic fact about that institution is that the medical school spends three-quarters of the entire university budget. That leads to grudges in the little law school, the little engineering school, and the little president's office, as they knuckle under to the Golden Rule. The department chairman with the gold makes the rules. Since most of that gold comes from research grants, hence ultimately from the federal government, the medical students and the teaching faculty don't have the same power they had during the Vietnam War era, either. Although medical school tuition imposes a crushing burden on the students and their families, leading to debts close to a quarter of a million dollars apiece, the tuition money doesn't amount to much in the university scheme of things, either. In some schools, tuition amounts to two percent of the medical school budget. You could eliminate the students entirely and not see much difference in the "school".

Unfortunately, when you become dependent on government grants, you find they can suddenly be terminated, or awarded without funding, or held up for several months by Congressional bickering. Meanwhile, there are salaries to pay, contracts to fulfill. Even if you can furlough some of the staff, it's not easy to see what you do about a thirty-year mortgage on a research building when there is a lull in its research funding. If you try to save money, the granting agency will try to get it back; they aren't authorized to make grants to be squirreled away. If you shift money to unauthorized uses, you risk going to jail. And yet, if you don't do something along those lines, the whole enterprise can collapse.

Having said that much to be fair, it is still uncomfortable to see the financial transparency of our most valued nonprofit institutions vanish behind a Byzantine fog of secrecy, out of which arise the magnificent towers of new buildings, and in front of which an occasional limousine is to be observed. No wonder the research scientists feel the constant pressure to produce. A Nobel Prize every ten years, or so, would go a long way toward quieting envious remarks from the liberal arts faculty.

Housed in those ivy towers are three institutions, the teaching hospital, the medical school, and the university, with three boards of trustees, and at least three ruling potentates. At irregular intervals, congressional committees do things to the Budget Reconciliation Act which enrich one of the three components of the institution or suddenly impoverish another, or both. Integration of the three under one governance sounds plausible until you notice how radically different is the mission of each one. You can take a big building away from one component and rent it back to them, and things like that, but you can't do it without starting whispers about Enron. You can gather up surplus funds from one of them during the decade of the eighties, but you have trouble giving it back twenty years later. Officials at Blue Cross come snooping to see if health insurance premiums are passing through this shell game, ultimately paying salaries in the department of English Literature. Everybody distrusts everybody else, somebody sasses somebody, and everybody gets fired.

The Fair Plan (sixth and Chestnut, Philadelphia) is a fire insurance company with unusual features. Some day, it is to be hoped some scholar will write a book about the highly mixed motives of the people who created it, compared with the unexpected ways it did or did not fulfill original expectations, of both its creators and its enemies. The Fair Plan only issues fire insurance on houses, if other insurance companies have turned that house down as a bad risk. Such risky houses would normally draw higher premiums for fire insurance, but the Fair Plan insures these risky houses at normal rates. Therefore, it loses money, which is made up by the other regular fire insurance companies in the state in proportion to the business they do, obviously thus raising the price of fire insurance for everybody. But in this way, Pennsylvania guarantees that everybody can get fire insurance. Is this a good idea? Might this be a way to give health insurance to all those people who can't get health insurance? Let's talk about the Fair Plan.

We'll set aside discussion of whether the Fair Plan was a product of cynical politicians pandering for votes, or whether it was a noble gesture for fairness and equality for our poorer citizens. It very likely had elements of both motives in it, but that doesn't matter any more. It's a form of hidden taxation, of course, and it has the result of making Fire Insurance seem more expensive in Pennsylvania than in other places that do their social work with real taxes. Go too far with that, and people will end up buying their insurance in Bermuda instead of boarded-up former fire insurance companies in Pennsylvania.

As the story is now told, the regular insurance companies had a choice of taking the "substandard" applicants in turn ("Assigned Risk") or creating a new company (Joint Underwriting Association). They decided they preferred the JUA. So a company was formed which specializes in nothing but bad risks, including a few arsonists and other unmentionables, but mostly poor people in bad neighborhoods. If we are ever thinking about following the Fair Plan model in health insurance, it would run the risk of being accused of creating a two-class healthcare system. But no one seems to bring up that rhetoric about fire insurance, primarily because there is comparatively little intrusion of politics in the matter, This system is given orders to spread the extra cost of universal fire insurance out to the policy holders of all fire insurance, and it does it very efficiently, without extending its mandate into setting firefighter wages, running fire departments or repainting scorched woodwork. The fundamental decision was whether to spend Society's money this way. Once that decision is taken, the task is to do it efficiently. Notice, this is not compulsory fire insurance; it is compulsory availability of fire insurance.

After the Fair Plan had been running for ten or so years, a funny thing emerged. There were years when the Fair Plan made a profit! The fire insurance industry had absorbed the Fair Plan into their scheme of things, and felt free to increase the number of applicants they rejected, during years when money was tight or business was bad. If you had compulsory availability of fire insurance, the provision of a company which could not refuse an application made it possible for every other company to refuse when it pleased. When the economy encouraged rejection, a better class of applicant came to the Fair Plan, which made the plan more profitable. When economic conditions reversed, this reversed, and the Fair Plan again lost money. For this reason, the insurance industry is very anxious to prevent the Fair Plan from becoming political, or getting tangled up in worthy but extraneous ventures. And that's probably a good model, too, if we are considering adopting a similar system for the health insurance world: stick to your mission.

Since this simple, tested idea never seems to get into the discussion phase of present agonizing over health insurance for the uninsured, it's one clear sign that such discussions at present are not terribly serious.

For fifteen years before Medicare, I practiced medicine in Philadelphia. At that time, the backlog of unmet medical care seemed infinite, impossible to satisfy. For one thing, we didn't have enough hospitals to fix all the hernias, gallstone, rotten teeth, festering bad leg veins, positive blood tests for syphilis, and a dozen other matters. But we set about it, doubling the number of medical students in each school's class, and doubling the number of schools. We built or renovated and re-equipped 124 hospitals in Philadelphia alone, as I remember.

Well, we were successful. It is no longer true that everybody's teeth are rotten, or that one Wasserman test in six is positive. Instead of throwing up our hands at infinity of unmet elective surgical cases, we now hear suspicions that perhaps cataracts are being "harvested", cardiac pacemakers becoming universal apparel, tummies being tucked. But professional jealousies to one side, an undeniable statistic emerges. We only have thirty hospitals.

Backlogs are like waterfalls. The level seems limitless until it suddenly disappears from sight. We spent far too much money on new hospital capital construction, and that spending spree has to account for a major portion of the cost of medical care that now doesn't seem to be producing anything worthwhile. These are the training costs of what can now be seen as temporary construction.

These thoughts came to me when a visitor to the Federal Reserve from Kazakhstan talked recently about medical care in that vast wasteland. At a time when petroleum supplies are short, Kazakhstan has discovered it has possession of the largest new oil field in the world. The social scene is like Texas in the Twenties, or perhaps the Yukon fifty years earlier. Whereas today it is questionable whether to spend the money to perform a Wasserman in America, positive tests are widely abundant in Kazakhstan. I daresay the hernias, varicose veins, bad teeth, and whatnot are just as bad there as they were in America in 1960. And they are gunning up their engines to build lots of the biggest most expensive hospitals anywhere because they can afford them.

Prediction: in 2050 nobody will be able to explain why medical costs are so high in Kazakhstan. After all, at that time there will be no positive Wasserman, no hernias, no gallstones.

As 46,000 medically uninsured persons in Chester County get sickness and injuries, they know that a Federal Law prohibits a hospital accident room from refusing to see them, so ways are found to shunt patients to the CVIM free clinic, run by volunteers. This law is, in turn, a response to a government-created situation where a hospital which "accepts" patients must keep them. Any economics teacher can tell you that supply/demand issues are best addressed by price adjustment, so price controls in whatever guise lead to shortages. I must say I have little sympathy with the devious strategies which hospitals often employ to disguise their rejection of uninsured patients. At the same time, I know a lifeboat will sink if too many climbs aboard. Nevertheless, the semantic switch from lack of insurance to lack of care implies that only more insurance can surmount the barriers to care, which is absurd. For one thing, I know too many hospital administrators who are paid a million dollars a year, and one who is paid two million. And at least two health insurance executives are in the newspapers with a net worth over a billion -- yes, that's billion with a b. We have reached a point where reducing all physician income to zero would only reduce "healthcare" costs by 10%. As I look at Dr. Wirshup's modest clothing I can only surmise she plans to continue her modest living until she is 80 years old, after which her savings might see her out. Squeezing physician reimbursement is not intended to save significant money, nor intended to restore physician incomes to more equitable levels. It is intended to address the oversupply of physicians without confronting either the universities or the foreign trained lobby.

The elite tranche of medical schools do their part to relieve physician oversupply without reducing class size, through the encouragement of their students to go into research. I was well along at the National Institutes of Health before I finally decided I had not gone into medical school with that goal, and returned to teaching and patient care in a more satisfying model not too different from CVIM's obviously Pennsylvania Dutch spirit. The Amish at the far western end of Chester County reject the whole idea of insurance; their most characteristic statement is "Don't send me no bills." That attitude is rather a contrast with the shiny housing and automobiles in the Silicon Valley developments of Southern Chester County, or even with some rather bewildered Quaker farm families scattered over the rest of the county next to the horsey set. Chester County is America.

On Second Street in Society Hill, next to the park where William Penn's house stood and a few feet from Bookbinders, is the house of Dr. Thomas Bond. Bond conceived the idea of building the first hospital in America and with Franklin's publicity machine succeeded in getting it built, to care for the "sick poor". Dr. Bond started a second enduring tradition as well. When the Legislature expressed doubt that the institution was sustainable, he pledged to convince the local medical profession to serve the poor without charge. Some of the legislators who voted for the measure did so in the belief that charity care would never appear so the gesture would be without cost. The physicians did indeed come forward, in sufficient numbers to run many institutions for two hundred years. In 1965 health insurance made its national appearance and has regarded the benchmark low costs of charity care as a threat, ever since.

One problem with health insurance reform debate is there's so little mention of health. After all, without illness the need for health insurance would vanish. So here, let's begin with the so-called statin drugs, the first really effective treatment for high blood cholesterol. Statin drugs do far more good than merely lowering cholesterol levels. Heart attacks, the commonest cause of death, declined so rapidly in the past ten years it's hard to say how low mortality rates will eventually go. Deaths from strokes, also caused by hardened arteries, declined almost as much and that's the whole purpose of treating cholesterol. Statins didn't do it all; it is about half due to prevention, where smoking cessation, aspirin and other drugs are effective, and half due to rescue treatments, like angioplasty, pacemakers and by-pass operations. But that's why the conquest of arteriosclerosis seems so assured; it doesn't all depend on a single drug which might later have unexpected disadvantages. Eventually, we can reasonably hope for prevention to displace rescue treatment, so maintaining the conquest of this disease should also get cheaper. This is already the most dramatic medical advance since the invention of antibiotics. No sooner do we say the mortality rate from heart attacks is down by 30% than we sense it may be down by 50%. Since it takes several decades to accumulate that rust in your arteries, the death rate from heart attacks may decline for thirty years, as we prevent rust accumulation from beginning in high school. Safety is still a question, but a small one. Right now, elated doctors whisper that perhaps arteriosclerosis has been conquered, don't say it too loud because that's bad luck.

Health insurance to cover absolutely everyone is an attractive goal, but may be an unachievable digression from achievable reforms.

Dr. Fisher

Sixty years ago medical doctrine was, only two research challenges remain: arteriosclerosis and cancer. That's a little exaggerated, since HIV, schizophrenia, Alzheimers Disease and nuclear explosions would bother us badly even after cancer is cured. But it's certainly high time to redirect the healthcare reform debates to include the massive economic changes going on, independent of any insurance reform. Let's repeat, for emphasis, we won't need universal health insurance if people don't get sick. Or put the same idea in more measured tones: Americans will almost certainly become more resistant to taxation for health insurance as this longevity extension sinks in. It may not matter that Canada, Britain, France and Zanzibar have universal health insurance plans. Americans younger than 35 are already past the political point where the need for health insurance is self-evident to them. The conquest of arteriosclerosis could easily push that resistance level to age 50, because people form their opinions from what they see happening to friends and relatives. Employers wrap their opinion around what they see happening to their employees.

If, then, it can be feared that employers might eventually rebel at sustaining major health insurance costs for employees whose lack of fatal disease is obvious from their personnel records, the present system of employer-based health insurance coverage could crumble. At the very least, it will draw employers to proposals for individual health insurance individually selected and owned, portable between jobs. At that point, another group will rise in rebellion. The employees themselves will resolutely oppose mandatory spending for health insurance they think they don't need. Insurance against the cost of obstetrics and baby shots, yes. After retirement, Medicare will take care of the ills of old age. Costs will progressively concentrate around the first year of life and the last year of life -- ninety years apart. Everything in the middle will depend on how much risk people are willing to take, and that depends in turn on how much the insurance costs. The fate of the whole health insurance industry depends on reducing claims costs, but their track record on that is quite poor. Consequently, their future attempts will likely be quite drastic, making insurance even more unpopular. For all these reasons, it is going to be very difficult to persuade the country to accept any reform that includes the word "mandatory". People may be restless with present forms of health insurance, but it's hard to imagine them switching to any alternative from which there is no retreat.

There's a great deal more to say, but let's veer to a new unwelcome consideration. For sixty years, since the administration of President Harry S. Truman, we have embroiled ourselves in a struggle to achieve health insurance for everybody. Many quite practical solutions to smaller problems have meanwhile been swept aside, as either irrelevant to the Main Thing, or hindrances which reduce the urgency of it. Somehow it has always seemed worth concentrating on the big reform of universal coverage while smaller conflicting improvements are forced to wait for the dust to settle. But the problem of 12 million or more illegal immigrant workers begins to demand solutions which have nothing to do with health insurance, and may make universal coverage impractical for decades to come. Illegal immigrants appearing in the accident rooms of border states were a manageable problem until their numbers grew so substantially. Since we obviously cannot extend free coverage to the whole undeveloped world, no proposal for universal health insurance is viable without a workable feature about non-citizens. Mix in the local politics of the border states and it is entirely possible that the exigencies of overall immigration will prove greater than the need to have a uniform health insurance system. The longer it takes to face this unpleasant reality, the longer we will delay small, non-universal, solutions to health care reform.

Although it is a digression from healthcare, it seems important to make a convincing case that immigration is a serious issue. The terrifying fact is, we have grown to need immigrant labor. The experience we gained in centuries of dealing with new waves of immigrants is not much help in coping with the new phenomenon of transient laborers in massive numbers. Historically, we struggled with bilingual education and crime ghettos, and mostly learned how to deal with that. Now, we need to fear the example of the rich Arab countries where transient foreigners greatly outnumber the citizens. The most extreme result is found in Kuwait, where hardly a single Kuwaiti citizen in gainfully employed; the rich citizens are helpless parasites on the labor of the illegals. Try proposing universal health care in Kuwait and see how much attention it gets. At the risk of being called an insensitive person, I'm afraid that being the richest country in the world may be exactly the reason why we can't do what Europe has done with health care. Meanwhile, this distraction keeps us from doing what we really might be doing.

* * *

In its thirty-year existence, cable television's C-span diligently filmed mountainous archives of mostly boring speeches, hearings and contemporary analyses of our government at work. The true genius of this expensive private philanthropy emerges with hindsight, as old fims which hardly anyone watched at the time can sometimes re-emerge to display what now everyone needs to know. The present case in point is to listen again to the soaring, convincing rhetoric of Bill Clinton's introduction of his Health Plan to Congress in 1993, bringing America to its feet with a realization that something was terribly broken about American health care. And then to be present in the next hour to the fumbling, circular and unconvincing solutions offered by Hillary Clinton before the sly, elaborately courteous, but pointedly probing questions of the Congress in hearings. She improved considerably with practice, but it is not lost on the viewer that she reverted to emphasizing the seriousness of the problem, rather than the aptness of the solution. The Plan was going to spend some money at first, save a lot of money later, but not harm the quality of care in the process. Just how it was going to do that was mainly supported by a passionate wish to do it, because it simply must be done. Total, universal, and hence mandatory, insurance coverage would, must, shall cut costs while it extended decent care to all. All other solutions had been exhaustively examined. Without total universal mandatory insurance coverage, nothing would work.

However, if one problem would make this solution unworkable, it is not necessary to describe twenty others. There are billions of people around the world who do not have American health insurance; obviously we do not expect to extend it to all of them. It would seem that we are talking about extending, giving, or mandating American health insurance to those who are within our borders. Assuming we ignore the handful of foreign tourists who pass through, that mainly means extending coverage to immigrants and those without coverage for brief periods, mainly new employment entrants and those temporarily between jobs. Switching from employer group policies to individually owned and selected policies would solve half the problem, but at the cost of extending income tax deductibility to everyone, hence eventually eliminating it for everyone. It would take a lot of persuading to convince everyone to give up that tax deduction, particularly when it is scarcely mentioned in the persuasion. But then let's look at the other half of the problem; we have 12 or more million illegal immigrants in the country, is someone proposing we mandate health insurance for them? What about next year, when several million immigrants go back home, and are replaced by several million different ones? When you dig into it, this sounds less and less like a health insurance problem, and more like an immigration problem. Would it not seem wise to delay the goal of universal coverage and solve other health problems while other people with other ideas solve the immigration issue?

And then, the issue of raising taxes by eliminating the tax deduction for health insurance. A considerable portion of this revenue source would be absorbed by subsidizing the people who don't currently get the deduction, which not only includes the uninsured but those who currently pay for their own health insurance, mainly the self-employed population. The residual federal reveue gain from the net effect of all this disruption would probably fall fall short of its promises, but even if it produced mountains of federal revenue, would it reduce the cost of medical care? It's pretty hard to see how shifting money from one set of pockets to another would have any effect whatever on the cost of running a hospital or doctor's office or pharmacy.

Whenever the Clintons or their spokesmen fumbled a little, it was possible to believe they did not fully understand the irrelevance of their solution to the problem they denounced. And whenever the Clintons appeared glib and polished, it was possible to believe this was all some sort of ruse. They couldn't win, and others seemed to grasp this before they did. Meanwhile, potentially important progress in the improvement of medical care was totally blocked by insisting that every proposal must meet the test of universal coverage. Tort reform, increasing the share of patient cost responsibility, permitting the interstate sale of health insurance, and -- stop right there, how will that insure the uninsured? By forcing every proposal, large and small, to be measured by whether it led necessarily to universal coverage, the debaters "framed the argument". Fifteen years later, we can see the country did get by without meeting that benchmark, and we also see how many useful improvements were pushed aside for failing to meet the standard of an impossible goal made possible.

Employer-group health insurance will surely decline because so many are dissatisfied with it.

Dr. Fisher

Preamble

It might take a hundred pages to describe America's dissatisfactions with its health insurance system, but we mean to limit the grousing to features which could usefully be changed. The present system served us well enough for sixty years, and we tip our hat to those who struggled during depressions and war years to cobble together some kind of health financing system, never claiming it would be perfect. For reasons that were sufficient at the time, we ended up with a dominant system which is employer-based and reflects that fact. In this book we skip the quaint history, going right to the advantages of gradually migrating to better systems, which surely means migrating away from employer group purchasing. An important word is gradual, because we must fix this engine without turning the motor off.

Later on, we'll return to what's significantly awkward about employer group policies, but here let's summarize complaints in a paragraph. The predicament of employers, first, is that instead of pre-paying for health care which defines what it covers and how much the items will cost, employers now pay for "service benefits". That's merely a best-efforts description of the scope, while the associated prices no longer relate to either costs or the marketplace -- undefined scope and prices are blank-check health insurance indeed. Next, many employees feel they receive a poisoned pill. They get "job lock", where insurability is suddenly in doubt whenever they change employers. Even more, employees fear what might happen to their health care if the employer must suddenly reduce expenses. Third, being outside this system is no escape from it. Congressional tax preferences seem entirely unfair to anyone who doesn't get them. In fact, even those who do get tax breaks suspect hospital cost shifting merely taxes it back. Taken as a whole, employer group benefits are a third-party system twice removed: those paying the bills suspect their insurance vendor doesn't supervise enough. But employers are reluctant to pay insurance companies more money to supervise services because they know neither one of them can directly observe it. Economists mutter the insight that health benefits really aren't employer-stockholder money at all. The money belongs to employees in lieu of higher wages, so what right do employers have to constrain how it's spent? Both employers and employees view health benefits as a boomerang they can't even throw away without getting hurt. Fairness notwithstanding, the American Academy of Actuaries estimates the waste in the third-party arrangement is at least 30% more than people would pay with their own money; that's roughly what they get as a tax deduction. Finally, the uninsured don't complain about exclusion as bitterly as you might suppose; roughly half of them could afford to buy it. The country struggles to give health insurance to absolutely everyone, but a growing number of people absolutely don't want it. There's more to say, but this should get us started.

This book asks the reader to trace complaints back to causes, and unite around objectives. The employer-based system stands in the road of other approaches, some of them quite attractive. We could rather easily work for a system where each person selects and owns an individual policy. Right now, workers participate in a group policy owned and selected by an employer. As a matter of fairness, employees ought to own and select their own health insurance, and it wouldn't be terribly hard to do. Even if you regard fairness as a loser's argument, the switch might be made so that much better products --currently blocked -- can flourish. The main focus of this early chapter is on some potential opportunities within individual ownership of health insurance, gained by employers surrendering ownership of group policies, one by one, on request by each employee. The first of the advantageous opportunities, the Health Savings Account, already exists after a long struggle. Other alternatives which follow might be even better, but experience with this one teaches some important lessons. Primarily, almost all variants require legislation, because the existing system has resorted to government to enforce its bargains. Furthermore, sufficient public enthusiasm must emerge to persuade insurance executives that enough market exists to justify the development effort. Both Congress and the Insurance industry must be persuaded the public is behind them, and both are tough to convince. By far the best way to convince anyone of anything is to conduct demonstration projects, experiments if you will, capturing what works and discarding what doesn't.

Health Savings Accounts

Health Savings Accounts started in 1980 and by 2007 have slowly grown to insure 13 million persons. Because of impediments in various state laws, the distribution of HSAs is uneven geographically (see Figure 1). Since the pattern closely resembles the red and blue maps of the 2004 presidential election results, observers have perhaps unfairly attributed HSA resistance to devious politics. That may be true in part, but the pattern more likely follows the distribution of laws intended to foster employer group insurance, and thus reflects concentrated industries, especially the steel, coal and auto businesses. HSAs therefore tend to be legally hampered in areas of heavy union influence, although seemingly they should not injure unions or provoke their opposition, and unions may not be mainly at fault.

These HSA accounts have two components, the catastrophic health insurance policy, and the tax-sheltered savings fund. These two structures revolve around the familiar advantages of high-deductible insurance, which is considerably cheaper than fully inclusive insurance because it avoids the heavy processing costs of myriads of small claims which most people could afford to pay for in cash. That concentrates the coverage to high-cost claims which, although less common, present the dual catastrophe of often being unaffordable and almost always putting the beneficiary out of work. Almost everybody needs some kind of catastrophic protection, although the size of the deductible might vary among income levels. Secondly, to be attractive to young people and others without significant savings, the savings account feature was added, as a way of providing the funds to pay for small claims and deductibles, without losing the cost awareness of paying for services directly. This savings and insurance combination was made tax-exempt in an effort to enhance attractiveness in competition with the tax shelter now accorded to conventional health insurance provided by employers and covering the same range of services. The Health Savings Accounts therefore were a step in the direction of extending health cost tax exemption to everyone, and shifting cost control decisions into the hands of the patient by awarding the savings to him. Permission to save unspent funds in the accounts from year to year created portability between jobs, and thus lifetime coverage. A final incentive, the ability in theory to strive for paid-up lifetime insurance, was thwarted in Congress by prohibiting the money in the accounts being spent on the premiums of the catastrophic insurance. It would be of some interest to know who in Congress promoted this prohibition, and what the reasoning was.

Proponents of this reform measure proceeded in their advocacy with the charming innocence of those who believed they had a splendid idea for the benefit of everyone. Anyone who resisted, must not understand the issue very well, and needed only to have it explained in greater detail. This feeling was heightened by seeing groups oppose the HSA who would seemingly only stand to benefit from it. Since experience has shown that a third of those who enroll in HSAs have previously been uninsured, it would seem reasonable to expect the uninsured and those who work in their behalf, to support it. Sellers of individual health insurance were expected to recognize the enhanced commissions of selling lifetime portable insurance compared with the drudgery of flogging annual renewals. Insurance company risk was removed entirely except for the catastrophic coverage portion. Unions, who prize their ability to pressure health insurance companies on their members' behalf should welcome a role in advising members on best choices for their money. Those who negotiate for higher wages and benefits would seemingly welcome the diminution of vague "service benefits" as a tool and the substitution of visible actual dollars into the accounts as a collective bargaining achievement. Union members individually would seem likely to carry their objections to managed care plans to the logical conclusion of reaping the rewards of cost containment for themselves, without impairing freedom to spend extra for luxuries if they please. One would have supposed union members would actively welcome the sort of insurance that gave them free choice of their doctor or hospital. Ultimately, you would suppose that union members would wish to lighten the burden of health costs of their employers, if only to demand higher pay in return, or alternatively to preserve their jobs from the ravages of foreign competition. But alas, legislative experience has been quite different. Prohibiting the use of tax-sheltered accounts to pay health insurance premiums is an inexplicable clause inserted by opponents of the proposal. Prohibiting the use by employers of more than fifty employees was another. Limiting the number of people who could have these accounts to 750,000 was still another unaccountably restrictive Congressional feature. It is almost as though there were some strategy of inhibiting the spread of these policies, with the ultimate goal of calling for total elimination based on lack of interest. The original pioneers of this program, now twenty years older, trudge on in bafflement at resistance, but rather steadily enlisting new subscribers in the states where they are permitted by local law. One consequence would appear to be a resurgence of local state resistance to interstate sale of health insurance.

In a certain way, other obstacles in the road of HSA accounts do contain some understandable logic. For the most part, they are the residuals of old state laws which once enhanced other projects with at least comprehensible goals. For example, mandatory benefits. Chiropractors, optometrists, physiotherapists and a host of other limited licence practitioners fought long, hard, and expensively to lobby laws into existence mandating payment for their services as a condition for any health insurance in their state. These primarily outpatient groups see high deductible insurance as a way of raising the insurance threshold above the typical price of their services, thus excluding them from a federally subsidized system. Before ERISA was passed in 1973, special mandates were added in state legislatures by the hundreds each year. That led to interstate businesses going to Congress for relief from the need to satisfy varying requirements in fifty states. This difficulty was garrisoned by the McCarran Ferguson Act of 1945, which uniquely excludes the business of insurance from federal regulation. Just how we got here from the original antitrust dispute is hard to explain, but nevertheless anyone can see that toppling this complicated structure would require a fierce political campaign. Therefore, by far the easiest pathway is to amend federal law to make it clear that conflicting state laws are pre-empted. Essentially, that is what ERISA accomplished, and when amendments are proposed, why employers regard ERISA as so untouchable.

Ratio of Prices to Underlying Audited Costs

Beginning this book with a discussion of the struggles of the Health Savings Account brings us bang against what the reader will soon learn I consider the most intractable issue in American health care reform. It's an outward symptom of the issue which must be addressed if significant progress is to be made in health reform of any sort, and it won't be easy to address it. My plan is to defer analysis in depth until later, after first describing one by one how it blocks progress in every single promising proposal. Only when it seems likely the reader has become thoroughly fed up with it, will we attempt to lead through its very complicated analysis. Please be patient with a very brief introduction, first showing how destructive it is to Health Savings Accounts.

To be eligible for Medicare payment, every hospital must submit an audited Medicare Cost Report. That makes it public information, subject to the Freedom of Information Act (FOIA) of 1966, although rightly any competitive organization is uncomfortable about divulging business information. A significant item on the Medicare report is The Ratio of Posted Charges to Costs. That is, the audited costs are divided into posted charges of the same year. If a not-for-profit hospital just breaks even for the year, the ratio might be expected to be about 1.0. With the allowance of say 4% for bad debts, the ratio could be 1.04. Because Medicaid commonly underpays for its share, the ratio might have to be 1.20. But that reasoning gets you to the wrong conclusion; the ratio is commonly five or eight times greater than that. To make this idea more comprehensible, an electrocardiogram with costs of $25 carries a posted price of $380 in at least one hospital; that would create a Charge-to-Cost ratio of 15.02. Fifteen times its independently audited cost? There is considerable reluctance to defend or discuss this matter, so it unfortunately invites speculation, both fair and unfair.

The reason for introducing the charge to cost ratio at this point is to identify a vexing issue which
makes health insurance seem so essential, while simultaneously interfering with making affordable insurance available. A person even a wealthy one, must have health insurance to protect himself against overcharging. Those who cannot easily afford health insurance look to high-deductible Health Savings Accounts because that makes insurance cheaper. Unfortunately, cash savings within the accounts can be quickly eaten up by even moderate exposure to huge price mark-ups. The attractiveness of these accounts is thus limited to those young healthy people who have no real health expenses, and to residents of those regions of the country where the practice of massive overcharging is uncommon. Without encumbering this narrative with too much detail, that is the explanation for the slow steady progress of HSAs, and their peculiar geographical distribution. If a representative charge for an electrocardiogram is $40, HSAs are a bargain. But if an electrocardiogram costs $380, purchase of HSAs is mainly restricted to those who have no great need for electrocardiograms. The outlook for HSAs is not completely bleak, however. At some time and in some areas the mass of subscribers will grow to a size where they can force the hospitals to confer a discount. Using collective purchasing power and the threat of publicity or even lawsuit, certain local brokers of HSAs have worked out arrangements for their members to receive market prices for their outpatient services. The most effective argument with hospitals has been that HSA holders do not create bad debts in their co-insurance. Unpaid deductibles and copayments are now the largest source of bad debts for most hospitals.

While focused on the hospital markup issue, let's engage in some unproven conjecture about it. Hospitals actually construct these inflated prices, but at first glance they would seem to have no great motive to antagonize cash paying clients this way, or to injure poor people, or to drive outpatient work toward free-standing clinics and doctor's offices. As a matter of fact, there is a small incentive in the rare wealthy foreigner who pays full freight, and the Medicare inpatient loophole of charge reimbursement for "outliers", cases with unusual costs. However, regulators are struggling to close such loopholes and cash payments are rare. I remember one oriental dignitary, reputed to own 8% of his country's Gross Domestic Product, who pulled out a wad of hundred dollar bills to pay a hospital, but totally befuddled the hospital clerk who didn't know what to do with real money. For every instance of this sort of thing, there are a hundred instances of hospital administrators genuinely distressed by their own mandate to collect seriously inflated bills from poor people.

Well, if hospital top management is conflicted by devising this practice, and mid level employees are distressed to implement it, well, who else has a motive to continue this markup? The obvious suspects are two: health insurance companies and Medicaid agencies. Obviously, sellers of health insurance rejoice in a situation where even people without important need for health cost protection must nevertheless buy it to protect against gouging. Think of an insurance executive before his home television, watching Presidents of the United States searching for ways to make their product mandatory for every citizen, and weeping because it is unattainable. Yes, health insurance companies have incentive to favor high hospital posted prices, but still it is difficult to see why hospitals would cooperate. State Medicaid agencies might also develop a motive to increase their own Federal reimbursement, and have occasionally engaged in some questionable maneuvers to do so through the arcane formulas of federal-state cost sharing. What's more, state governments are often in a position to help hospitals who play nice. In a naughty world, some of that may go on, but massive conspiracy seems implausible. So, if those with potential incentives are unable to force compliance, why do hospitals do this? Why would they persist in something they privately deplore, silently biting their lips at the criticism it provokes?

According to the records of the Pennsylvania Hospital, the following 48 persons were patients in the hospital on July 4, 1776:

Richard Brinkinshire (Admitted 11/15/1775)

John Ridgeway (Admitted 12/26/1775)

James Chartier (Admitted 1/6/1776)

patient (Admitted 1/6/1776)

patient (Admitted 1/20/1776)

patient (Admitted 1/20/1776)

Mary Yell (Admitted 2/7/1776l)

John Beckworth (Admitted 2/7/1776)

Bart. McCarty (Admitted 2/10/1776)

John King (Admitted 2/10/1776)

Robert Alden (Admitted 2/17/1776)

William Patterson (Admitted 3/6/1776)

Elizabeth Hanna (Admitted 3/9/1776)

John McMahon (Admitted 3/13/1776)

Mary Burgess (Admitted 3/23/1776)

Mary Anderson (Admitted 4/10/1776)

John Hatfield (Admitted 4/15/1776)

Eliza Haighn (Admitted 4/17/1776)

Charles Whitford (Admitted 4/24/1776)

patient (Admitted 5/8/1776)

Susanna Carrington (Admitted 5/8/1776)

patient (Admitted 5/8/1776)

William Johnson (Admitted 5/13/1776)

Lazarus Chesterfield (Admitted 5/22/1776)

Mary Spieckel (Admitted 5/22/1776l)

William Edwards (Admitted 5/22/1776)

patient (Admitted 5/23/1776, Lunatic)

Jane White (Admitted 5/25/1776)

Charles McGillop (Admitted 5/29/1776)

---Fitzgerald (Admitted 6/1/1776)

Michael Rowe (Admitted 6/6/1776)

patient (Admitted 6/6/1776)

John Hughes (Admitted 6/12/1776)

Joseph Smith (Admitted 6/15/1776)

Esther Munro Lunda (Admitted 6/15/1776)

Mathew Coope (Admitted 6/19/1776)

Anne Patterson (Admitted 6/19/1776)

Thomas Savoury (Admitted 6/20/1776)

Rebecca Winter (Admitted 6/26/1776)

Elizabeth Manning (Admitted 6/26/1776)

Negro (Admitted 6/24/1776)

Elex. Scanvay (Admitted 6/24/1776)

Fanny Stewart (Admitted 6/24/1776)

Peter Barber (Admitted 6/29/1776)

Catherine Campbell (Admitted 6/29/1776)

Ann McGlauklin (Admitted 7/3/1776)

Elizabeth Lindsay (Admitted 7/3/1776)

Ann Jones (Admitted 7/3/1776)

The records indicate the following diseases were the reason for admission of those patients.
Although in Colonial times there was no medical delicacy to avoid offending readers,
present privacy standards require that we strip the diagnoses from the name of the patient and list them independently.
There is some overlap, sometimes making it difficult to judge which disorder caused the admission.

Sore, poisoned or ulcerated legs: 16 cases

Lunacy, mind or head disorders: 10 cases

Syphilis: 7 cases

Fever and Rheumatic fever: 7 cases

Dropsy: 5 cases

Gunshot: 4 cases

Diabetes: 1

Blindness with clear pupil: 1

Spitting blood: 1 case

Dislocated arm: 1 case

Inflammation of face: 1 case

Scurvy: 1 case

broken arm: 1 case

The following physicians were elected at the Managers Meeting dated 5/13/1776:

As commonly stated in medical history circles, the history of the Pennsylvania Hospital is the history of American medicine. The beautiful old original building, with additions attached, still stands where it did in 1755, a great credit to Samuel Rhoads the builder and designer of it. The colonial building on Pine Street stopped housing 150 patients around 1980, supposedly at the demand of the Fire Marshall, although its perpetual fire insurance policy still owes the hospital several thousand dollars a year as an unspent premium dividend. There may have been one small fire during two centuries of use, but its true fire hazard would be difficult to assert. It was just out of date. The original patient areas consisted of long open wards, with forty or so beds lined up behind fluted columns, in four sections on two floors. The pharmacy was on the first floor, the lunatics in the basement, and the operating rooms on the third floor under a domed skylight. It was entirely serviceable in 1948 when I arrived as an intern doctor. Individual privacy was limited to what a curtain between the beds would provide, but on the other hand, it was possible for one nurse to stand at the end of the award and recognize any distress among forty patients immediately. In this trade-off between delicacy and utility, the utility was certain to be preferred by the Quaker founders. Visitors were essentially excluded, and if a patient recovered enough to be unnaturally curious about neighboring patients, well, he had probably recovered enough to go home.

Located between two large rivers, South Philadelphia up to ten blocks away was essentially a swamp until the Civil War. So, there were seasonal epidemics of malaria, yellow fever, typhoid, and poliomyelitis at the hospital until the early twentieth century. Philadelphia was a port city, so sailors brought in cases of venereal disease, scurvy, even an occasional case of anthrax or leprosy. During the Industrial Revolution of the nineteenth century, tuberculosis, rheumatic fever, and diphtheria were part of clinical practice. But underlying the ebb and flow of environmental effects, there was a steady population of illness which did not change a great deal from 1776 to 1948. These patients were all poor, because the rules in Benjamin Franklin's handwriting restricted service to the "sick poor, and only if there is room, for those who can pay." In 1948 there was a poor box for those who might feel grateful, but no credit manager or official payment office. The matter had been considered, but the cost of collection was considered greater than the likely revenue. When Mr. Daniel Gill was offered the position as the hospital's first credit manager, it was suggested that he be given a tenth of what he collected. To his lifelong regret, Dan Gill regretted that he refused an offer that he had felt he could not afford to accept.

So, the wards were filled with victims of the diseases of poverty, punctuated by occasional epidemics of whatever was prevalent. And a second constant feature of the patients was their medical condition forced them to be housed in bed. For centuries, physicians dreaded the news that a new patient was being admitted with "dead legs".

At a recent meeting of the Right Angle Club, Stephen C. Bennett an administrator, and Alix Esposito a social worker, kindly addressed the club about the Veterans Hospital where they work. The federal government pushes its mass produced products into every city, but gradually a local flavor starts to creep in; how this process works is illustrated by the fact that Steve's grandfather Claude was once the manager of the Bellevue Stratford Hotel. The VA hospital may be a piece of Washington D.C. planted on Philadelphia soil, but Philadelphia will surely absorb it with the passage of enough time. The VA was once a part of the Veterans Administration, but now it is a part of Department of Veterans Affairs, run by a Cabinet Secretary, no less. It's the second largest department of the federal government, and since the only bigger department is the Department of Defense, the combination of the two shows you how far we have come from the nation's original opposition to "standing armies". The fact that these two components of our war machine are separate, on the other hand, surely symbolizes some hidden tensions between our regular armed forces and the American Legion, or the hidden frictions between two congressional committees, or else some other mystery of bureaucratic politics.

The Veterans Administration was founded in 1930, the Philadelphia VA Hospital was built in 1950. Originally, it was designated as a Deans Hospital, signifying the intention to confer prestige and lessen friction with the medical schools. Originally, Philadelphia's VA was affiliated with several medical schools, but in time its proximity to the University of Pennsylvania led to the elimination of ties with other schools. Although the bed capacity is growing in reaction to America's successive wars, its open wards converted after 1960 to more semi-private style, and its focus of medical activity shifting with changes in medical science, the VA remains isolated from the rest of the city and the rest of Philadelphia medicine. Part of this is physical; the hospital is confined by the University of Pennsylvania, the parking complex next to the Amtrak line, and the Woodland Cemetery, so there is little room to grow. And comparatively little commonality with the neighbors. There are 2000 employees and a $30 million budget, marooned in a sea of automobile traffic going elsewhere in a big hurry, too big to ignore but too small to influence the local culture.

Vietnam War

The patients are distinctly different from those you find in other hospitals. There is a great deal of chronic mental disorder a heavy influence of alcohol and substance abuse and rehabilitation, and even some residential apartments for patients. On a national level, between a third and a half of homeless people are veterans, but for some reason in Philadelphia, only a tenth of the homeless are veterans. During the Vietnam War, the system of draft avoidance through educational exemptions resulted in that generation of veterans coming from an unusual concentration of low income and low educational subgroups. The system of government pensions and promotions tend to retain employees in the system for a lifetime. It's true that informal transfer arrangements allow a certain amount of migration to Florida (in the winter), or Maine (in the summer), or California (to see what LaLa land is all about), but those who do this stay within the VA system. Consequently, the interchange of ideas and techniques that professionals carry with them between hospitals is curtailed, confined somewhat to variations within the VA system, conforming to its social norms. An archipelago, although not exactly a gulag archipelago.

Veteran

But by far the greatest source of distinctiveness in the VA hospitals comes from the byzantine eligibility standards for the patients. The reimbursement systems of Medicare, private insurance -- which more or less copy each other -- changed around 1988 in a way that more or less eliminated psychiatric inpatient care in the community, especially if it lasts more than a month. The VA, on the other hand, was forced by circumstances to increase its attention to this area. Consequently, all social workers everywhere inquire immediately whether an addict or a schizophrenic might be a veteran. A differential sorting process quickly gets underway, with the VA as the preferred place to send such patients if at all possible. Non-veteran victims of the same conditions tend to have a worsened time of it, because the pressure on state and local governments to make some provision, has been relieved.

Walter Reed Hospital

At the other extreme, the social elite of the armed forces are not admitted, either. President Eisenhower was unquestionably a veteran, but he had his famous hospitalizations at >Walter Reed Hospital. There's an income limit for VA admission, which automatically cuts off 20-year veterans above a certain rank, possibly major. And there are overlapping disability classifications for military hospitals and veterans facilities, with considerable latitude available to uniformed boards of three serving officers, only one of whom is a physician. The result is a general perception that if you have any influence at all, you can generally avoid the VA and be treated in a military hospital, probably in a VIP unit. Good for them; I'd take advantage of it if I had a chance, too. But by siphoning off the top brass, a lot of pressure to improve quality is removed as well. If a VA hospital had eight or ten Admirals and Generals as patients, with academy classmates coming to visit, it's safe to assume that courtesy, orderliness, and cleanliness would instantly improve. And take it from me, the quality of care would improve, as well.

WHILE we debated in 2010 whether to disregard what could be afforded, and provide sickness care to all, the idea subtly changed to providing "health care" for all. That is, the proposal was not merely to expand sickness care to everyone, it included an indefinite expansion of what everyone would get, and who would provide it. Medical care is provided by physicians, sickness care is provided by doctors, nurses, and hospitals, and healthcare is provided by a much larger undefined group of "providers". No wonder it costs more, and therefore a surprising number of people are unsure they do want all of it. It's almost a certainty that most people do not want to lose control of this definition, at least if it is to apply to them, personally. The issue centers on "healthcare" versus sickness care". How's that, again?

Preventive Health Care poses unique issues for seniors.

Dr. Fisher

For example, the notion that preventing disease is superior to treating disease, goes back at least to Benjamin Franklin. Arguing that the Pennsylvania Legislature ought to help build the nation's first hospital, Franklin offered the truism that it saves money in the long run to treat people early and get them back to work. Franklin could hardly have foreseen that it isn't always true. Preventive medicine implies it is cheaper to spend small amounts, possibly every year, for many people, than to spend large amounts for a few. It's a matter of arithmetic, of course, and doesn't always have the same answer. When the math works against a preventive approach, it's usually argued the gain in health is worth it; but that's not invariably the case, either. Once a person ceases to be an infant, the equation rebalances. And as an individual approaches end of life, his renunciation of what it takes to prolong life gathers more respect. It's a conflicted opinion, of course. Older people are outraged by any suggestion their lives do not deserve to be prolonged, but still, outspokenly prefer to die rather than wear a colostomy bag, or a respirator, or be fed with a spoon. If they are Jehovah's Witnesses and refuse transfusions, that too, commands more respect when they are elderly. This is a familiar problem, not a new one. What's new is more subtle and pervasive.

The public probably does not fully appreciate the disappearance of what might be called capricious diseases, caused by the operation of chance, or God's will. These are fatal illnesses like heart attacks, strokes, epidemics, and other things not anyone's fault. Except for cancer and Alzheimer's Disease, most really common serious illnesses which remain, are to some extent self-inflicted. Smoking causes lung cancer, alcoholism causes accidents and homicides as well as cirrhosis of the liver, taking recreational drugs damages lives, unprotected sex causes HIV. Obesity causes hypertension and diabetes, neglecting your medicine undermines treatment. If this keeps up, we are going to see the day when every obituary will seem too shameful to print. Poor Jud is dead; it's his own fault.

It's maybe even worse than that.The 2000-page Obama care plan was too complicated for even the Congressional committees to understand. But the public was not hostile for technical reasons, the public was irked at the idea. All the President's celebration of saving money through mandatory preventive care provoked the public to tell him, Get off my back. Almost every smoker has tried at least once to quit, absolutely every obese person has repeatedly tried to lose weight unsuccessfully. It's hard, let's see you try it. And now it goes beyond nagging, we are going to take the position that every person with a self-inflicted disease is costing the nation money we can't afford. The country has a right to punish people who drive us to bankruptcy. Let's have some Wellness police, and fair but firm punishments. Is that really what Obama has in mind? Well, sir, you just get off my back.

Even so compliant and dutiful a person as my late wife declared that when she got to be seventy, she was going to try marijuana. The fact that she actually lived thirteen years longer without doing it, did not change her basic attitude. When you get to a certain age, many of the old rules don't apply to you, doggone it.

A single e-mail to constituents, and no other communication visible to the general public, announced a town hall meeting with our Congressman, Bob Andrews, on the campus of Rowan University, from 6 to 8 PM, August 24, 2009. The subject was to be Health Care Reform Legislation. On arrival, it was hard to find the auditorium in the square mile of new college campus, and only a small sign entitled "Event" indicated the place to park. Lots of cars.

By counting seats in a row and multiplying by the number of rows, the University Auditorium held 3000 people, but at 6PM it was difficult to find a vacant seat. The doors were almost blocked by two lines of people standing to speak at microphones in the center of the hall, snaking all the way out past the television cameras and then out the door. These people were strangely silent, preoccupied but not rude, apparently rehearsing their speeches. In the lobby outside the doors, several workers were distributing posters showing "Thank You!", checking people off on lists of some sort. Many of those who got posters were wearing red T-shirts emblazoned with something or other.

Rowan University

When I finally got a seat inside, it was behind a whole row of such T-shirted poster-holders, mostly but not entirely of the black race. The Congressman was giving a little speech to the effect that he was one of the committee members who wrote the bill, so of course, he had to support it. Strange, that as a member of Commerce and Labor he was working on a bill which traditionally is the province of the subcommittee on Health, of the Ways and Means Committee. In any event, that gave him the ability to explain some of the language which was a little too hard to understand. Several in the audience shouted out something unintelligible at that point, but mostly the audience sat in silence, waiting for the questions. He soon opened it up for questions, because he wanted to know what his constituents were thinking.

Although a few inevitably wandered off the point, questioners were confident, moderately deferential, remarkably effective. No matter how it was stated, and no matter how it began ("I have always voted for you, Congressman"), they were at the microphone to run a sword into him. To some extent, posting the entire bill on the Internet had changed politics. One old man, reading from his papers, said that page 343 says, etc; to which the harassed Congressmen blurted out, "That isn't true!" But the old man held his ground, "Oh, yes, and what else isn't true, that's written in the bill?"

Our congressman represents a working-class district, as clearly illustrated by his previously running for Congress without opposition. In searching for the reason this solidly Democrat audience was so antagonized, one gathers they generally have Unionized health benefits and feel threatened that insuring the "illegals" will be paid for by impairing their own insurance. Somehow they feel that anyone who denies it is lying to them. ("It isn't what's in the bill, it's what will be in the bill ten years from now.") Except for college professors, Union members have the most luxurious health insurance coverage in America and are accustomed to boasting of it. Somehow, this privileged position drowns out their envy of rich people. When told that only the top x% of the country would have its taxes raised, one man bore right in on the Congressman. "You never heard anyone asking a poor man to give him a job". (Yeah, right, right on, Yeah.)

Although the people in red shirts holding posters put up a fight for fifteen minutes or so, they soon subsided out of recognition of who "owned" the room, and the remaining three hours of "questions" were almost uniformly negative. After an hour, the television cameras left the room, and at that signal, the people in front of me wearing red shirts also left. After a succession of speakers praised physicians somewhat excessively, a couple of physicians got up and made a poor showing at the microphone. One of them, a fat woman, had the poor judgment to tell these folks that many diseases like diabetes were self-inflicted, but was to hear back that it would help if our President would himself stop smoking and leave the rest of us to mind our own business. Two women who proclaimed themselves single mothers were no better treated..

At 9:30, a meeting scheduled to end at 8PM still had a thousand people in the audience, and fifty at the microphones. But I had enough. They made their point. All that remains is to see how fairly the television editors extract significant clips and to find out how the rest of the nation feels.

LATER FOOTNOTE: As matters turned out a few months later, this national legislation had more of a local New Jersey effect than the audience could have guessed. Mandating health insurance for 30 million uninsured, Obamacare accomplished it for 15 million of them by forcing them into the state Medicaid program, which is widely acknowledged to be the worst program in American medicine, because it usually is the most under-funded. New Jersey residents are firmly opposed to anything which raised their already high local taxes and will focus intently on the attempt in the coming lame-duck session of Congress (November 2010) which intends to transfer federal money to states to pay for Medicaid, and which is given only the narrowest chance of success. Republican Governor Christie deftly split the industrial unions from the public sector unions with the remark, "Every time they get a raise, you get a tax increase." It was hard to answer.

It sometimes seems as though Medicare has been a standard part of the scene for so long it now needs major reform, but when a doctor has practiced Medicine for sixty years he has seen a lot of contrasts between the old way and the new way, not all of them favorable to the new -- which we are now tired of, and trying to repair. That's particularly true if the doctor practiced at America's first and oldest hospital, because it sustained many traditions from two centuries before, and was among the last to yield to the imperatives of newcomers for the last forty years, their hands grasping for the purse strings. Dr. Norman Makous must either have a remarkable memory or a thick, detailed diary. He tells three hundred pages of fast-reading anecdotes about sixty years of his own medical practice, before summing up in fifty pages of reflection. One by one, he describes the innovations in his field of cardiology and how they affected him and his patients. Thiomerin, one of the first of many easy ways to pump out excess body fluid accumulation, transformed the treatment of congestive heart failure. Synthetic digitalis claimed to but probably did not much improve things over dried digitalis leaves; it certainly raised the cost. Cardiac catheterization, electro-shock resuscitation, ultra sound diagnostics, MRI and CAT scans, cardiac surgery using the heart-lung machine, and finally cardiac transplants -- all started out as headline-news spectaculars, evolved into cutting-edge advances, and then settled down into the Standard of Care that you obtained a plaintiff lawyer to sue about. All in one medical lifetime, supposedly prepared for by one Medical School course, followed by one residency apprenticeship, the specialty of Cardiology was completely transformed at least six times.

Meanwhile, the leadership of the medical profession was tenaciously resisted by those who supposedly followed its direction. Hospital administration.

Over the next several weeks, members of Congress will be confronted with one scary story after another about what will happen if they try to cut health care costs.

Tax the costliest health insurance plans? Workers will be denied medical care. Reduce the growth of spending on home health care agencies? Elderly patients living alone will be left to fend for themselves. Set up a commission to reduce Medicare waste? Again, the elderly will suffer. Impose a tax on plastic surgery? That’s unfair to unemployed women looking to enhance their appearance. (Seriously, the plastic surgeons are making that case.)

But here’s the thing: It is abundantly clear that our medical system wastes enormous amounts of money on health care that doesn’t make people healthier. Hospitals that practice more intensive medicine, to take one example, getno better results than more conservative hospitals, research shows. And while the insured receive better care and are healthier than the uninsured, the lavishly insured  those households with so-called Cadillac plans  are not better off than households with merely good insurance.

Yet every time Congress comes up with an idea for cutting spending, the cry goes out: Patients will suffer! You’re cutting bone, not fat!

How can this be? How can there be billions of dollars of general waste and no specific waste? There can’t, of course.

The only way to cut health care costs is to cut health care costs and, in the process, invite politically potent scare stories.

I’m as skeptical as anyone of the ability of the United States Congress to formulate good policy, but the last few days have offered a reason to hope that its members may be summoning the political courage to endure the scare stories.

That would be a big deal. Health costs, through Medicare, are the main source of the huge long-term budget deficit. In recent years, they have also caused insurance premiums to rise so quickly that employers haven’t had the money to give workers a decent raise. David Cutler, a Harvard health economist, estimates that the measures already in the health bills will increase the typical family’s income $2,500 a year by the end of the decade.

Real health reform also has the potential to save lives. Because we now pay doctors to provide more care rather than better care, we have not given them an incentive to reduce hospital-acquired infections and other avoidable errors. A new amendment from three senators  Susan Collins, a Maine Republican; Joe Lieberman, the Connecticut independent; and Arlen Specter, the Pennsylvania Republican turned Democrat  would increase the financial penalty for giving patients such infections.

Even this idea, however, has its own scare story. The Washington Post reported on Sunday that hospital groups were & quietly steaming; over it and suggested their support for health reform could be in danger.

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One piece of encouraging news came on Saturday, when the Senate finally began listening to its own health care advisers.

To help it oversee Medicare, Congress set up an outside board of doctors, economists and other experts in 1997, called the Medicare Payment Advisory Commission. Medpac, as it’s known, tries to figure out which services Medicare may be paying too little for, thus creating shortages, and which ones it may be overpaying for.

Perhaps the single clearest example of an overpayment is home health care. Home health agencies, which care for Medicare patients with specific health needs (as opposed to those receiving general long-term care), have been proliferating in recent years. Yet, according to the most recent data, they still had fat profit margins on Medicare, 16.6 percent. One reason, the Government Accountability Office found, was that fraud was rife.

So MedPAC has recommended cutting home health payments, and the Senate bill would do so, by 13 percent over 10 years. On Saturday, the Senate rejected a Republican amendment, supported by a few Democrats, too, that would have blocked that cut.

The home health provision is actually typical of the cost-cutting measures that have made it into the Senate bill: it’s pretty good. It won’t be perfect, obviously. Some people somewhere may indeed have to stop working with a home health agency they like and find a new one. But that’s not a reason to waste billions of dollars a year subsidizing an industry’s profits.

The real problem with the Senate bill is that it doesn’t go far enough to cut costs and improve care. Here too, however, there are positive signs. For months, centrist Democrats have been saying that cost containment was one of their biggest priorities, but they had not done much to help the cause. That has now started to change.

“ Senators are now really focused on cost containment,” says Mr. Cutler, who has been advising some of them.

The day before the Senate defeated the home health care amendment, Senators Collins, Lieberman and Specter introduced an amendment with some measures to push medicine away from the insidious fee-for-service payment system. The cost-cutting momentum continued on Tuesday when 11 of the 13 freshman Democratic senators announced their own package of measures. Neither proposal is earth-shattering, but both would make a difference.

Among other things, the freshmen’s proposal would do more than the current Senate bill to push insurers to use a standardized payment process. Right now, doctors and hospitals often have to fill out different forms for different insurers. “There’s a lot of money there,” Len Nichols, head of health policy at the New America Foundation, says.

Intriguingly, officials from a rainbow of special interest groups showed up at the freshman senators’ news conference to praise the proposal. To me, their presence highlighted both the biggest strength and the biggest weakness of the proposal. On the one hand, it has a real chance to make it into the final bill. On the other hand, it, like the Collins-Lieberman-Specter amendment, also fails to fix the single biggest flaw in the Senate bill.

Last month, Senator Harry Reid, the Democratic leader, gutted an independent commission  a more powerful version of MedPAC, meant to shield Medicare payment decisions from political interference  that many economists consider necessary. Mr. Reid’s bill would allow the commission to take action only if Medicare spending was rising even faster than total health spending. If total spending rose 8 percent one year and Medicare spending rose 7.9 percent  a miserable situation  the commission would have to sit on its hands. AARP, unfortunately, has emerged as an opponent of a strong commission.

But without one, health reform will be hobbled. And the Senate may be the only hope for changing it.

The House has shown little interest in cost control. President Obama and his administration have pushed aggressively for it, but they have limited leverage. Mr. Obama can’t credibly threaten to veto any of the health reform bills that now seem likely to emerge from Congress.

So after the 11 freshmen announced their plan on Tuesday, I caught up with Mark Warner, the Virginia Democrat who is the group’s leader, underneath the Capitol building and asked him how he and his colleagues would deal with the inevitable scare stories still to come: How do you respond to a lobbyist who effectively accuses you of killing patients?

“I don’t know any other way than you take incremental steps,” Mr. Warner said, “and you hope you get to the tipping point where fear and misinformation don’t have an effect, because people see these things don’t do what they are accused of doing.”

That, obviously, is the long-term strategy. In coming weeks, we’ ll see how well Mr. Warner and his colleagues deal with the immediate pressure. The Grim Reaper is a tough opponent.

Although Congress is offering several thousand pages of proposals for healthcare "reform", none of them even mentions the three main difficulties, to say nothing of fixing them. Let's be terse about this:

1. Health insurance is fine, but if you make it universal, there is no impartial way to determine fair prices. Somebody must haggle with the vendor in order to introduce the issue of what is the service worth? The customer doesn't care what it costs to make, or whether the vendors are being paid fairly. If everyone is insured, no one cares what it costs. Not only do all costs rise, but they rise without coordination, without a sense of what each component is worth, relative to alternatives.

2. Employer-based insurance is fine, but it ends when employment ends. You just can't stretch employment-based insurance because you can't stretch employment.

3. State Medicaid programs are fine, but just about all fifty states are going broke trying to pay for it. Extending it to more people by raising the income limits just makes things worse. Items 2. and 3. are related. Trying to do both -- expand Medicaid as employment shrinks -- during a recession is incomprehensible. Item 1. (price confusion) gets drawn into this because the States try to pay less than it costs, hoping to shift the deficiency through hospital cost-shifting, utterly confounding the information which prices provide. The doctors have no way to tell which is the cheapest approach to a problem, so they don't try. Without control over prices, we can only control volume.

That's really all there is to this mess. Not one word of the current legislation even mentions these problems, so of course the legislation blunders. Even a child can see that compulsory expansion of benefits to universal coverage will fail if you can't pay for what you already have. No one will make sacrifices for a new system if the sacrifices seem futile. They are futile, so leave me alone.

The current administration has been compared with bank robbers who see they are trapped and decide to shoot their way out. Let's see them try to shoot their way past the first Tuesday after the first Monday in November.

The Sunday, April 11, 2010 Philadelphia Inquirer contained an eighteen-page statistical summary of the schools within the eight-county area around Philadelphia. The New Jersey school districts, but not the Pennsylvania ones, report per-pupil spending right next to the proportion contributed by a state government. If you know something about the sociology of New Jersey, you form some conclusions about state school aid which probably apply to all states, while confessing they only provably apply to New Jersey. Let's therefore say, it only provably applies to New Jersey that you spend more on schools if you are spending someone else's money.

In the welter of numbers supplied by this statistical report, it seems useful to focus on the strip of school districts along Haddon Avenue, starting from the place where the retreating British soldiers once ferried from Philadelphia to Camden (in 1778, of course.) Haddon Avenue extends directly East until it strikes King's Highway, where the British then turned North to scuttle toward the safety of their navy at New Brunswick. We are thus talking about the school districts of Camden, Collingswood, Haddon Township, Haddonfield and Cherry Hill, with Haddon Heights and Pemberton thrown in because of special features they illustrate.

Pemberton Township in Burlington County spends the largest amount of per-pupil school money in South Jersey, $18,970. It jumps right out at you that 82% of that money is contributed to the school district by the state government. Starting back at the Delaware River, 99% nonwhite Camden gets 88% of its school money from the state and has the second-highest spending of $16,131 per pupil. Moving along the path of the British soldiers, the next town after Camden on Haddon Avenue in Collingswood, spending $14,262. Next comes Haddon Township, spending $13,243. It thus seems to prove that the further you get from the Delaware River, the less you spend on education, because next in order comes Haddonfield, with spending of $12,273. But not quite, because Cherry Hill increases a little to $12, 914. The percentage of state funds follows a parallel sequence from Collingswood to Haddonfield (36%, 31%, 6%) and then rises slightly to 11% in Cherry Hill. For comparison, nearby Haddon Heights spends $13,449, of which 10% derives from a state government. And just in case you think there is a racial implication, nearby Gloucester City is 84% white, and gets 82% of the $16,046 it spends on schools, from the rest of the state by way of state contributions. However, these numbers also allow you to calculate how much the local districts spent of their own money. It turns out it is just the reverse. The more state aid a district gets, the less it spends, itself. The more state aid it gets, the more it spends, period.

The conclusion seems to emerge that an education assistance program designed to achieve equality, actually stimulates appreciably more spending in poor districts than in prosperous ones; at least so far, poor educational quality in poor districts is acknowledged to remain poor. There are some people who might say these statistics suggest a racial correlation, but some others could say the correlation is with distance from Philadelphia, while others would associate factors undisplayed in the statistics. Because there are more non-teachers than teachers employed by the schools, it is not certain that extra money going to schools will improve the teaching. Nevertheless, what is not demonstrated at all is a tendency for better education to be found where school money is most liberally applied. At least, it is safe to say that anyone who claims the quality of education parallels these spending patterns in New Jersey, would be laughed at.

Robin Hood

Of course, it is true that prevailing opinions about the local quality of education are as biased as the opinions about the local football teams, or the differing quality of tomato pies. That's partly because the prevailing opinion of the school system has a strong effect on local real estate values, one of the main concerns of real estate agents. My neighborhood in Haddonfield is very close and sociable, so it's been confided that three empty-nest neighbors have sold their Haddonfield houses and moved to Haddon Heights to save money on taxes. When people make decisions like that, they generally know what they are doing. Available data, however, can be misleading to others because total school spending including subsidies does not reflect local property taxes, while local spending does. Empty-nesters are also very likely downsizing to less expensive homes, where of course the taxes seem lower and are also moving to districts which have fewer children per house. Where that isn't the case in the school districts from which they flee, subsidies are extracted from state income and sales taxes, which move from district to district, right along with empty-nesters who move. For those with children attending public schools, emphasis in these considerations is somewhat different.

The voters have no idea how "equal" became "more" money for education. A fair conjecture would be that the poorer districts kept pressing the legislature for more as a matter of "fairness", leaving the more prosperous districts to shout "outrage", but less effectively. By voting down a majority of local school budgets both groups are shouting, all right, although it would be more effective to shout at their representatives in Trenton. Especially in a census year, when gerrymandering is on every agenda.

BECAUSE America had recently revolted to rid itself of King George III, the Constitutional framers of 1787 sought to construct a government forever free from one-man rule. Inefficiency could be accepted but central dictatorial power, never. It is unrealistic however to expect a wind-up toy to keep working forever, and our Constitution creates the same worry. After two centuries, some chinks have appeared.

Founding Fathers

Political parties existed in 18th Century England and Europe, but the American founding fathers seem not to have worried about them much. Within ten years of Constitutional ratification, however, Thomas Jefferson had created a really partisan party which naturally provoked the creation of its partisan opposite. James Madison was slowly won over to the idea this was inevitable, but George Washington never budged. Although they were once firm friends, when Madison's partisan position became clear to him, Washington essentially never spoke to him again. Andrew Jackson, with the guidance of Martin van Buren carried the partisan idea much further toward its modern characteristics, but it was the two Roosevelts who most fully tested the U.S. Supreme Court's tolerance for concentrating new powers in the Presidency, and Obama who recognized that the quickest way to strengthen the Presidency was to weaken the Legislative branch.

Dramatic episodes of this history are not central to present concerns, which focuses more on the largely unnoticed accumulations of small changes which bring us to our present position. Wars and economic crises induced several presidents, nearly as many Republicans as Democrats, to encourage migrations of power advantage which never quite returned to baseline after each crisis. Primary among these migrations was the erosion of the original assumption of perfect equality among individual members of Congress. A new member of Congress today may tell his constituents he will represent them ably, but when he arrives for work he is figuratively given an office in the basement, and allowed to sit on empty packing cases. This is not accidental; the slights are intentional warnings from the true masters of power to bumptious new egotists, they will get nothing in their new environment unless they earn it. Not a bad idea? This schoolyard bullying is a very bad idea. If your elected representative is less powerful, you are less powerful.

Houses of Congress

Partisan politics begins with vote-swapping, evolves into a system of concentrating the votes of the members into the hands of party leaders, and ultimately creates the potential for declaring betrayal if the member votes his own mind in defiance of the leader. The rules of the "body" are adopted within moments of the first opening gavel, but they took centuries to evolve and will only significantly change direction on those few occasions when newcomers overpower the old timers, and only then if some rebel among the old timers takes the considerable trouble to help organize them. In the vast majority of cases, after adoption the opportunity to change the rules is then effectively lost for two years. Even the Senate, with six-year staggered terms, has argued that it is a "continuing body" and need not reconsider its rules except in the face of a serious uprising on some particular point. Both houses of Congress place great weight on seniority, for the very good purpose of training unfamiliar newcomers in obscure topics, and for the very bad purpose of concentrating power in "safe" districts where party leaders are able to exercise iron control of the nominating process. Those invisible bosses back home in the district, able to control nominations in safe districts, are the real powers in Congress. They indirectly control the offices and chairmanships which accumulate seniority in Congress; anyone who desires to control Congress must control the local political bosses, few of whom ever stand for election to any office if they can avoid it. In most states, the number of safe districts is a function of controlling the gerrymandering process, which takes place every ten years after a census. Therefore, in most states it is possible to predict the politics of the whole state for a decade, by merely knowing the outcome of the redistricting. The rules for selecting members of the redistricting committee in the state legislatures are quite arcane and almost unbelievably subtle. An inquiring newsman who tries to compile a fifty-state table of the redistricting rules would spend several months doing it, and miss the essential points in a significant number of cases. The newspapers who attempt to pry out the facts of gerrymandering are easily gulled into the misleading belief that a good district is one which is round and compact, leading to a front-page picture showing all districts to be the same physical size. In fact, a good district is one where both parties have a reasonable chance to win, depending for a change, on the quality of their nominee.

So that's how the "Will of Congress" is supposed to work; but the process recently has been far less commendable, and in fact calls into dispute the whole idea of balance of power between the three branches of government. We here concentrate on the Health Reform Bill ("Obamacare") and the Financial Reform Bill ("Dodd-Frank"), which send the same procedural message even though they differ widely in their central topic. At the moment, neither of these important pieces of legislation has been fully subject to judicial review, so the U.S. Supreme Court has not yet encumbered itself with stare decisis of its own creation.

Three branches of government

In both cases, bills of several thousand pages each were first written by persons who if not unknown, are largely unidentified. It is thus not yet possible to determine whether the authors were affiliated with the Executive Branch or the Legislative one; it is not even possible to be sure they were either elected or appointed to their positions. From all appearances, however, they met and organized their work fairly exclusively within the oversight of the Executive Branch. Some weighty members of the majority party in Congress must have had some involvement, but it seems a near certainty that no members of the minority party were included, and even comparatively few members of highly contested districts, the so-called "Blue Dogs" of the majority party. It seems safe to conjecture that a substantial number either represent special interest affiliates, or else party faithful from safe districts with seniority. The construction of the massive legislation was conducted in such secrecy that even the sympathetic members of the press were excluded, and it would not be surprising to learn that no person alive had read the whole bill carefully before it was "sent" to Congress. It's fair to surmise that no member of Congress except a few limited members of the power elite of the majority party were allowed to read more than scattered fragments of the pending legislation in time to make meaningful changes.

The next step was probably more carefully managed. No matter who wrote it or what it said, a majority of the relevant committees of both houses of Congress had to sign their names as responsible for approving it. Because of the relatively new phenomenon of live national televising of committee procedure, the nation was treated to the sight of congressmen of both parties howling that they were only given a single day to read several thousand pages of previously secret material -- before being forced to sign approval of it by application of unmentioned pressures enabled by the rules of "the body". When party members in contested districts protested that they would be dis-elected for doing so, it does not take much imagination to surmise that they were offered various appointive offices within the bureaucracy as a consolation. As it turned out, the legislation was only passed narrowly on a straight-party vote, so there can be a considerable possibility of its likely failure if the corruptions of politics had been set aside, with members voting on the merits. Nevertheless, since this degree of political hammering did result in a straight-party vote, it leaves the minority party free to overturn the legislation when it can. The prospect of preventing an overturn in succeeding congresses seems to be premised on "fixing" flaws in the legislation through the issuance of regulations before elections can open the way to overturn of the underlying authorization. Legislative overturn, however, is very likely to encounter filibuster in the Senate, which presently requires 40 votes. Even that conventional pathway is booby-trapped in the case of the Dodd-Frank Law. The Economist magazine of London assigned a reporter to read the entire act, and relates that almost every page of it mandates that the Executive Branch ("The Secretary shall") must take rather vague instructions to write regulations five or ten times as long as the Congressional authorization, giving the specifics of the law. The prospect looms of vast numbers of regulations with the force of law but written by the executive branch, emerging long after the Supreme Court considers the central points, years after the authorizing congressmen have had a chance to read it, and well after the public has rendered final judgement with a presidential election. The underlying principle of this legislation is the hope that it will later seem too disruptive to change a law, even though most of it was never considered by the public or its representatives.

Bill become a Law

The "regulatory process" takes place entirely within the Executive branch. Congress passes what it terms "enabling" legislation, containing language to the effect that the Cabinet Secretary shall investigate as needed, decide as needed, and implement as needed, such regulations as shall be needed to carry out the "Will" of Congress. Since the regulations for two-thousand page bills will almost certainly run to twenty thousand pages of regulations with the force of law, the enabling committee of Congress will be confronted with an impossible task of oversight, and thus will offer few objections. The Appropriations Committees of Congress, on the other hand, are charged with reviewing every government program every year, and have the power to throttle what they disapprove of, by the simple mechanism of cutting off the program's funds. Members of the coveted Appropriations Committees are appointed by seniority, come from safe districts, and are attracted to the work by the associated ability to bestow plums on their home districts. By the nature of their appointment process, unworried by the folks back home but entirely beholden to the party bosses, they have the latitude to throttle anything the leadership of their party wants to throttle badly enough. The outcome of such take-no-prisoners warfare is not likely to improve the welfare of the nation, and therefore it is rare that partisan politics are allowed to go so far.

The three branches of government have become unbalanced. These bills were almost entirely written outside of the Legislative branch, and the ensuing regulations will be written in the Executive branch. The founding fathers certainly never envisioned that sweeping modification will be made in the medical industry and the financial industry, against the wishes of these industries, and in any event without convincing proof that the public is in favor. This is what is fundamentally wrong about taking such important decisions out of the hands of Congress; it threatens to put the public at odds with its government.

Justice George Sutherland

There is no need to go further than this, harsher words will only inflame the reaction further than necessary to justify a pull-back. And yet, the Supreme Court would do us a mercy if it doused these flames; the Supreme Court needs a legal pretext. May we suggest that Justice George Sutherland, who sat on the court seventy years ago, may have sensed the direction of things, short of using a particular word. Justice Sutherland recognized that although it is impractical to waver from the principle that ignorance of the law is no excuse, it is entirely possible for a person of ordinary understanding to read a law in its entirety and still be confused as to its intent. He thus created a legal principle that a law may be void if it is too vague to be understood. In particular, a common criminal may be even less able to make a serious analysis. Therefore, at least in criminal cases, a law may well be void for vagueness. In this case, we are not speaking of criminals as defendants, or civil cases of alleged damage of one party by a defendant. Here, it is the law itself which gives offense by its vagueness, and Congress which created the vagueness is the defendant. Since we have just gone to considerable length to describe the manner in which Congress is possibly the main victim, this situation may be one of the few remaining ones where a Court of Equity is needed. That is, an obvious wrong needs to be corrected, but no statute seems to cover the matter. The Supreme Court might give some thought to convening itself as a special Court of Equity, on the special point of whether this legislation is void for vagueness.

We indicated earlier that one word was missing in this bill of particulars. That would be needed, to expand the charge to void for intentional vagueness, an assessment which is unflinchingly direct. It suggests that somewhere in at least this year's contentious processes, either the Executive Branch or the officers of the congressional majority party , or both, intended to achieve the latitude of imprecision, that is, to do as it pleased. Anyone who supposes the general run of congressmen voluntarily surrendered such latitude in the Health and Finance legislation, has not been watching much television. Given the present vast quantity of annually proposed legislation, roughly 25,000 bills each session, the passage of a small amount of vague legislation might only justify voiding individual laws, whereas an undue amount of it might additionally justify a reprimand. However, engineering laws which are deliberately vague, might rise to the level of impeachment.

The Right Angle Club was recently treated to a sophisticated movie and a polished presentation by Dr. John Q. Trojanowski, Professor of Geriatric Medicine at the University of Pennsylvania. Among other posts, he holds the Truman G. Schnabel, Jr. Chair, which particularly endears him to me since Nipper Schnabel was an old friend. Dr. Trojanowski has kindly given permission to use his slides on Alzheimer's Disease.

Dr. Alois Alzheimer

When Dr. Alzheimer published his description of the disease which bears his name, in 1906, it was treated as a rather esoteric or even insignificant accomplishment. The average life expectancy at that time was age 47, so although some people did live to an advanced age, most people didn't. A newly-identified disease which crippled and shortened the lives of old folks was pretty well brushed aside. Doctors were too busy treating tuberculosis, rheumatic fever, syphilis and typhoid fever -- diseases which were part of ordinary practice. As things turn out, however, life expectancy nearly doubled in the ensuing century, so both the number of old folks has vastly increased, and they are dying even later, disproportionately increasing the prevalence of Alzheimer's disease, to the point where it is now the sixth most common cause of death. At present, nearly half of people who achieve the age of 65 will eventually develop Alzheimer's, and most of them will die of it. It's a protracted fatal disease, requiring a great deal of expensive care. One rough rule of thumb is that when patients reach the point of being unable to recognize the spouse or nearest relative, they will probably still live another two years.

With conventional nursing care, utilizing home nursing aides, it will likely cost more than $50,000 to take care of any patient during a perfectly dreadful terminal experience. One of the more imaginative ideas for relieving this financial burden has been to store up credits for volunteer work as nursing assistants after retirement, but before infirmity, say between 65 and 85. Those credits could then be used later to pay for the care of that same volunteer when he or she becomes incapacitated. The tax authorities have been unsympathetic, however, fearing any system of barter undermines the income tax mechanism. Since there presently is a huge pool of unused labor in the early years after retirement, this idea should be revived, and at least given a trial as a pilot experiment.

Experience with trying to treat this growing epidemic brings out features which somewhat seem to support the idea of "intellectual reserves". Educated and intellectually active people tend to develop the condition less frequently, or at least later in life; aboriginal cultures develop the condition much younger than advanced ones, head injuries and sports which promote them provably increase the prevalence. It looks as though persons with greater educational attainments have some kind of reserve capacity to be used up before the disease finally overtakes them. And strange things happen; the incidence on the island of Guam is now only a tiny fraction of what it was a century ago. Unfortunately, all of these anecdotal experiences contain the chance that it is actually the early onset of the disease which lessens social skills, rather than the other way around. Unfortunately, exercise does not seem to improve cognitive functioning, although it improves other functions.

What is Alzheimer's

Naturally, there is great hope for scientific improvement in the treatment of this condition. After all, the percentage of persons over the age of 80 who are disabled from any condition is only half of what it was in 1982. However, the most discouraging feature of Alzheimer's dementia is that it is a degenerative disease. The estimate is made that when the first symptom of Parkinsonism appears, roughly 40% of the substantia nigra has already been destroyed. That sort of observation leads to the very discouraging possibility that a new treatment for the condition, even one that is completely effective, may never do any patient's symptoms any good. At least, research workers in the field may have to give up the approach of treating patients to see if they get better because the damage has already been done. Very likely, vast numbers of apparently normal persons may have to be treated for years, in order to see whether the disease is eventually delayed in its onset. That's quite different from defining the value of a drug for pneumonia, where all you have to do is treat a hundred patients to see if it works. Delaying the onset of this disease would be no small achievement, however, because of the average age of the patients. A delay of five years in the onset would reduce the overall quantity of impaired persons by 50%. So, an effective drug for Alzheimer's would be enormously valuable, but it would be far more expensive to determine potential delays in onset, the potential toxicity of years of preventive therapy would be greater, and the public disappointment on behalf of existing patients would be something to deal with. All of these discouragements tend to inhibit drug manufacturers from spending vast sums to develop a treatment, particularly in an era where cost concerns are prominent. But we all better get used to it: delaying the onset of degenerative diseases is likely to be more expensive, and much more difficult to prove, than the medical miracles of say infectious disease we have grown accustomed to looking for.

Last week I had a cataract extraction; it went well. I now see like an eagle, there was no pain at any time, and it only interrupted my life for about six hours, including travel time. While I suppose there is a chance of complications during the next month after surgery, I'm an optimist and statistics are on my side. As they say in South Philadelphia, faced about it.

Cataract Extraction

Those were of course not the serene thoughts I had in advance of the surgery, which carries certain risks. Persons with myopia like me often have a mismatch in the size of their eyeball and the size of the retina inside so the retina can tear or detach during the first few days after the eyeball's integrity has been pierced. The lens can get stuck and break apart as it is being removed, hemorrhage can occur. The surgeon's hand can slip; he can sneeze at the wrong moment. So, bad things could have happened to me, making my twinge of anxiety entirely justified. But that's all behind me now; I even forgot to ask the surgeon what type of lens he intended to implant so I could argue with him. Let the Captain run the ship. I was surrendering my fate to the largest eye hospital in the country. They perform between fifty and a hundred of these procedures every day, and my surgeon is the chief of the cataract department.

And yet, and yet, I have a few grumbles, leading to some generalizations about health care for the elderly. In the first place, I was told by an administrator who sounded terribly fierce that I had to be there at 8:15 AM, in the company of the person who would drive me home, or they wouldn't do my surgery. I told her I doubted that, so we got off to a poor start. The procedure ought to take less than ten minutes to perform, perhaps twenty if you count the formalities. Furthermore, I was a consultant to that hospital once, and still had a certain amount of standing in the Philadelphia medical community, having once been a trustee of almost everything you can be a trustee of. Sure enough, when my driver and I arrived at 8:15, there were more than fifty others waiting. They finally called my name at 1:30 in the afternoon, and by roughly 2 o'clock I was out of there. I was by no means the last one waiting to be called, and it sort of felt as though we were all treated like logs of wood. While I was inside the operating room, a couple of nurses were chattering, and one said she much preferred to work on weekends because there were no administrators around. I could see what she meant.

To keep this essay from sounding like constant whining, let me tell a little of the history of this operation. Until perhaps twenty years ago, a cataract extraction involved keeping the patient in the hospital after the operation with the head in sandbags, for two full weeks. Now, it takes ten or twenty minutes, and you are free to have lunch with a friend in an hour unless you give in to your driver who has been waiting five hours and wants to go home. The results are far superior, and you don't have to wear glasses that look like the bottom of Coke bottles afterward; in fact, I already see pretty well without any glasses before a week is up. In the past, the great fear was a complication known as sympathetic ophthalmitis, in which disturbing the lens of one eye would set up a sort of allergy which could also make you blind in the other, good, eye.

Spitfire

In the famous Battle of Britain in the Second World War, the British pilots to whom so many owe so much were covered with a plexiglass canopy in a fighter plane called the Spitfire. Enemy machine gun fire would often shatter this canopy, and among a lot of other damages, shards of plexiglass got lodged in the eyeballs of the pilots. For the most part, it was left in place because other injuries needed tending more urgently. Long after the Battle, it finally dawned on a British ophthalmologist that this wasn't supposed to happen, it was supposed to cause sympathetic ophthalmitis and the pilots were supposed to go blind. From this, it was finally deduced that plexiglass was safe to use as a lens implant, a so-called "hard implant". You can still see people walking about with these lenses, recognizable because their eyes seem to glow when the light shines into them, like crocodiles along the Amazon at night.

The second step in the migration to modern cataract surgery was the insight that soft pliable forms of plastic retain a memory of the shape they were molded into. So, the old lens can be scooped, lasered or sucked out of place, and a squeezed-down soft lens can be shoved into the vacated space. Retaining its shape-memory, it springs back into the correct shape for a lens, and you are all set.

And finally, there was the stitch. If you cut into the side of the cornea, you have to stitch it up after you are through. And then later you have to remove the stitch. An eye surgeon who should be more famous if he were more popular then invented a form of curved incision which did not requite a stitch because the pressure within the eye held it closed. It was a simple and brilliant idea, which took scarcely a few extra seconds but eliminated one of those sources of complications which dogged the statistics. There was only one problem. This surgeon decided to apply for a patent for his invention, and the medical world had a fit; not only did he patent the curved incision, but he also sent bills for royalties to every eye surgeon he could prove was using it. I happened to be seated the House of Delegates of the American Medical Association when this matter came up, and the uproar was considerable, including some ribald limericks which were read the House "as a matter of personal privilege". Shortly afterward the courts did the right thing and disallowed the patent.

So that pretty well summarizes how cataract surgery became a modern miracle, with a great many elderly people now playing demon bridge when they would otherwise be fed with a spoon. Somehow, the national gratitude is not quite equal to its obligations, and we hear people grumble that eye surgeons make too much money. When the achievements of politicians match those of the average eye surgeon, perhaps they will have a point. But not sooner.

But I'm allowed to complain, and perhaps obliged to issue a warning to my fellow elders about the true source of our discontent. It seems to start with eye drops, but it's more than that. There's a simple technique for instilling eye drops, which involves pulling down the lower lid, creating a pocket, and putting the drop in the pocket, after which the subject blinks his eye and spreads the drop around. Works slick takes no extra time, and little trouble. And while a half-dozen nurses put drops in my eye, and must put fifty drops in fifty eyes every day, not one of them did it right. The drops were spattered on the eyelids and eyelashes, much of them running down my cheek. One extra-large nurse with an attitude put her thumb on my upper eyelid and spread the lids so painfully apart that I cried out in protest. It's supposed to hurt, was the unwelcome answer. I resolved then, and soon carried out the threat to scold the surgeon and the Physician-in-Chief about the responsibilities of supervision, but there are two other more serious issues behind this indignity.

In the first place, the reimbursement mechanisms were modified so that hospitals were no longer paid for maintaining a school of nursing. Within a few years, all hospitals had trimmed this expense, and nurses went to college to be trained in nursing, miles away from the nearest hospital, and eventually trained by other nurses who had themselves had scant experience with patients. Although it is boasted that they now have bachelor's' degrees instead of mere diplomas, their skill with patient care is far inferior to that of the generations which went before them. Instead of being well trained, they are rule-ridden.

The other underlying issue lies with us, the patients. In France people retire at fifty I hear, and in this country, we retire at sixty-five. But we sit around, essentially quite healthy, until eighty-five or later. Everybody knows we have nothing important to do, so they waste our time. Or rather, whenever there is a choice of wasting a minute of working-person's time or an hour of a retired person's, it is the retired person who is dumped on, and it's only going to get much worse with time. Hey, folks, it's degrading to be so useless. Go to work and accomplish something. Don't let the younger generation treat you like logs of wood.

The Right Angle Club of Philadelphia was recently addressed by Arthur L. Caplan, Director of the Center for Bioethics of the University of Pennsylvania. His topic was Healthcare Rationing. It was interesting to hear the viewpoint of someone who views the 2010 mandatory health insurance system primarily through the lens of its ethics; just like the Tea Party objectors on the other extreme of politics, he sees the new law as merely a rationing system. However, his initial salvo is similar to that of the bill's proponents before it was enacted: "Every system always rations in some way or another." If you expected the outcome to be rationing from the beginning, your focus is naturally fixed on just what sort of rationing you get, perhaps measured by whatever kind of rationing you had formerly hoped for.

Ethics is, after all, a system of constraining native, unconstrained, outcomes into something deemed more suitable. That's a definition which could be equally well applied to reform of all sorts and repeatedly tends to cast reformers as underdogs fighting the establishment. Since the American healthcare system in 1950 could fairly be described as rationing healthcare with money, and its history from then to now has been one of jumbled similarity to 1950, most discussion accepts a financial rationing description for what Obamacare changed. There is much uneasiness about totally supplanting the marketplace with insurance since universal insurance leaves no room for setting prices -- except by government proclamation, filtered through some sort of insurance bureaucracy. There was a time when many people thought that was better than paying for it yourself, but now that it's here, there are growing doubts.

UPENN

There's surely going to be a last-ditch effort to overturn Obamacare, whether through Congress or the Courts and failing that, through stalling it until the President can be replaced in 2016. Let's assume for the moment that such efforts fail, and are not followed by armed rebellion. If the central issue is how do we find more acceptable methods of rationing, two proposed methods have begun to seem attractive. The first is proposed by Congressman Ryan of Wisconsin, to the general effect of taking what we now spend, chopping it up, and issuing vouchers for the same amount less net middle-man costs. This approach stops the rise of costs right where they are, and thus pleases Congress. But the thing to be rationed is redefined as well. It rations future cost rises, net of any savings wrung out of the system by competition for voucher money. It's fair to claim this system should not deny the present level of care to almost anyone. It has a price, however. If you want future miracles, you have to pay for them.

A second proposal depends on the observation that most healthcare costs are concentrated in the first year of life, and the last year of life. Strip those costs out, and what is left would almost surely be manageable, particularly in view of how the concentration of costs in those two areas steadily increases. Essentially, this system promises to take generous care of the helpless when they are born and when they die. Healthcare costs during the years of school and employment, however, could more confidently be left to people who are sentient and reasonably healthy, so that's where the inevitable rationing would be concentrated. Once more, the payment system has been modified to avoid such third-rail issues as euthanasia for Grandma or for self-inflicted diseases, or even for abortion. Those would be left to the public to manage during stages of life where there is reasonable likelihood that the patient's own wishes can be paramount. For now, we pass over the technicalities of last-year-of-life insurance, but it could fairly begin with reliance on reimbursing Medicare after the fact, while traditional first-dollar insurance for pregnancy and newborns, or even mandatory government reimbursement, might seem acceptable even to strong conservatives.

So, what's proposed here is a substitute for both the traditional system and the bewildering command and control system of Obamacare. It shifts the subject matter for rationing away from those areas that frighten the public the most, toward either: rationing future unknown scientific advances, or, rationing healthcare during the years when it is comparatively predictable and involves patient cooperation during the years of reason. That's the summary; other proposals are welcome.

Regrettably, after each November election, we first must potentially endure a lame-duck Congress, followed by two years of White House-Congress gridlock. There will, unfortunately, be scant tolerance for ethicists, during those grievous national experiences.

Former Congressman Joe Sestak visited the Franklin Inn Club recently, describing his experiences with the Tea Party movement. Since Senator Patrick Toomey, the man who defeated him in the 2010 election, is mostly a Libertarian, and Senator Arlen Specter who also lost has switched parties twice, all three candidates in the Pennsylvania senatorial election displayed major independence from party dominance, although in different ways. Ordinarily, gerrymandering and political machine politics result in a great many "safe" seats, where a representative or a Senator has more to fear from rivals in his own party than from his opposition in the other party; this year, things seem to be changing in our area. Pennsylvania is somehow in the vanguard of a major national shift in party politics, although it is unclear whether a third party is about to emerge, or whether the nature of the two party system is about to change in some other way.

For his part, Joe Sestak (formerly D. Representative from Delaware County) had won the Democratic senatorial nomination against the wishes of the party leaders, who had previously promised the nomination to incumbent Senator Specter in reward for Specter's switching from the Republican to Democratic party. For Vice-Admiral Sestak, USN (Ret.) it naturally stings a little that he won the nomination without leadership support, but still came reasonably close to winning the general election without much enthusiasm within his party. He clearly believes he would have beaten Toomey if the party leaders had supported him. It rather looks as though the Democratic party leadership would rather lose the election to the Republicans than lose control of nominations, which are their real source of power. Controlling nominations is largely a process of persuading unwelcome contenders to drop out of the contest. Sestak is, therefore, making a large number of thank-you visits after the election, and clearly has his ears open for signs of what the wandering electorate might think of his future candidacy.

America clearly prefers a two-party system to both the dictatorial tendencies of a one-party system, as well as to European multi-party arrangements, such as run-offs or coalitions. A two-party system blunts the edges of extreme partisanship, eventually moving toward moderate candidates in the middle, in order to win a winner-take-all election. Therefore, our winner-take-all rules are the enforcement mechanism for a two-party system. Our deals and bargains are made in advance of the election, where the public can express an opinion. In multi-party systems, the deals are made after the election where the public can't see what's going on, and such arrangements are historically unstable, sometimes resulting in a victory by a minority fringe with violently unpopular policies. In our system, a new third-party mainly serves as a mechanism for breaking up one of the major parties, to reformulate it as a two-party system with different composition. Proportional representation is defended by European politicians as something which promotes "fairness". Unfortunately, it's pretty hard to find anything in politics anywhere which is sincerely devoted to fairness.

Going far back in history one of the great theorists of legislative politics was the Roman Senator Pliny the Younger, who wrote books in Latin about how to manipulate a voting system. For him, parties were only temporary working arrangements about individual issues, a situation where he recommended: "insincere voting" as a method for winning a vote even if you lacked a majority in favor of it. Over the centuries, other forms of party coalitions have emerged in nations attempting to make democracy workable. Indeed, a "republic" itself can be seen as a mechanism devised for retaining popular control in an electorate grown too large for the chaos and unworkability of pure town hall democracy. A republic is a democracy which has been somewhat modified to make it workable. Our founding fathers knew this from personal experience, and never really considered pure democracy even in the Eighteenth century.

Senator Specter

The two main actors in shaping the American Republic were George Washington and James Madison. Madison was young, scholarly and largely unknown; Washington was old, famous, and insecure about his lack of academic political education. Both of them knew very well that if Washington really wanted something he was going to have it; what mainly restrained him was fear of looking foolish. But he hated partisanship and conniving, partly as a result of having been the victim of General Mifflin and the Conway Cabal. Washington hated political parties and anything resembling them; Madison was young and uncertain, and briefly surrendered the point. It took about two years of real-life governing for Madison to conclude that political parties were absolutely essential to getting something accomplished. In this, he experienced for the first time those unwelcome "pressures from the home state", with Thomas Jefferson determined to thwart Alexander Hamilton, and Patrick Henry thundering and denouncing any hesitation in going for the jugular vein of opponents. Madison was deeply concerned with making his new nation success and eventually joined Jefferson in the Virginia policy of opposing banks, cities and manufacturing. When Washington saw that Madison was committed to this course, he never spoke to him again. For Washington, honesty was always the best policy, and personal honor is never regained once it is lost. The compromise of 1790 was particularly vexing to their relationship, when Washington's honor and personal finances were used as bargaining chips for moving the nation's capital opposite Mount Vernon on the Potomac River, in return for placating Hamilton and Robert Morris with the assumption of state revolutionary war debts.

Henry Clay 1811

Legislative partisan politics took a violent turn in 1811 when 34-year old Henry Clay was elected to his first term as a member of the House of Representatives. The Senate was less prestigious than the House in those days, and Clay had spent his time as a senator studying the landscape of the House before he made his big move upward. Up until that moment, the role of Speaker was that of mediator and administrator of the rules, partisanship was considered a shameful thing in a Speaker. Young Clay was elected Speaker on the first day of the first session after he moved to the House as a member. Seniority was brushed aside, and this newcomer took over. It takes only a moment's reflection to surmise that a lot of politics had taken place before the House convened. Not only that, but Clay immediately added the power of the Speaker to appoint committee chairmen, to the invisible powers of majority leader. The office of majority leader had not yet been created, but it was not long in emerging that anyone who could assemble enough votes for Speaker was also able to make highly partisan choices for Committee Chairs. Eventually, the seniority system was imposed in part as a reaction to perceived abuses of Speaker power. It is worth a digression to reflect on the role of any seniority system, which as it is clearly seen in labor-management industrial relations, serves to deprive management of promotion power, usually substituting seniority for selection by merit. In the case of the Speaker, the seniority system catapults the power of the Speaker over that of every member of his caucus. To rise in a seniority system for committee chairmen, a member must first be appointed to a desirable committee -- by the Speaker, or by his instructed favorites on the appointment committee. It puts in the hands of the Speaker or his agents the power to humiliate a member by ignoring his seniority; the other members know immediately what that means. To understand the power of this threat, reflect on Woodrow Wilson's famous observation that "Congress in committee, is Congress at work."

Soon after Henry Clay made his dramatic moves, Martin van Buren extended the idea of partisan party politics to the actual election of Congressmen. Much of the hoopla and deceptiveness of subsequent campaigns was invented by Andrew Jackson's vice president. And that included their own deal, in which van Buren worked for Jackson's election in return for a promise that he would be the successor, President. After that came the election of 1848, in which William Henry Harrison was elected as a man born in a log cabin. When, in fact, he had been born in one of the largest mansions in Virginia. That had been approximately George Washington's residence description, too, but it is hard to see Old Stone Face lowering himself to accept any office unless it was offered unanimously.

Compare that with the campaign financing episode which created the urban political machine. The Philadelphia traction king Wm. L. Elkins was narrowly concerned with building streetcar lines along with his business associate P.A.B. Widener; Widener had been a city politician before he got into street cars. One or the other of these two approached the Mayor of Philadelphia with the complaint that it interfered with building streetcar lines to have to bribe every bartender on every street corner. So he made a proposal. It wasn't the money that bothered him, because he could just raise trolley fares to cover it, it was the protracted delays. So, how would it be if the trolley company just delivered a big lump-sum bribe to the mayor? That would give enormous political power to the party boss through the power to distribute or withhold the boodle to party workers. And it would save the trolley company lots of time, while not costing any more than the "retail graft" system. Since then, just about every urban political machine in the country has been largely financed through the macing of utilities.

The downward trend of serial modifications to the Philadelphia Constitution of 1787, should be clear enough without further illustration. If the Tea Parties aren't mad about it, they should be. More likely, however, they are mainly mad about the modern pinnacle of sly tinkerings, plainly displayed on TV during the enactment of the Obama Health Bill. The point was repeated for emphasis in the Dodd-Frank financial bill, in case it is ever claimed to have been accidental. In both cases, 2000 page bills were prepared out of sight and thrust before the Congress with orders to enact them in four hours. If that's a representative government, perhaps we ought to go back to having a King.

Around the turn of the 20th Century, it was the fashion to build specialty hospitals, devoted to a single disease like tuberculosis or polio, or one specialty like obstetrics or bones and joints. Eventually, it was realized that almost any disease is handled better if a full range of services is readily available to it. Around 1925, some inspired philanthropists made it possible to combine specialties within a medical center, and it is now generally agreed this is a better way when population density permits it. On the other hand, it is likely a source of price escalation. Time marches on, and the problems of excessive bigness are also beginning to predominate. The idea immediately occurs, to winnow out the routine cases which do not need so much technology, so that we can concentrate and devote high technology (and costs) to patients who will really benefit. And, immediately the perplexing outcry is heard that such rationalization is "cherry picking", which will soon bankrupt the finest institutions we can devise. The validity of such assertions needs to be examined impartially.

At the same time, the horse and buggy era has been left behind, causing new separations along class lines, the flight to the suburbs, and the migration of philanthropy toward the exurban sprawl, as well as into urban centers. In all this commotion it was overlooked for a long time that medical care was not merely following the patients to new locations, it was becoming more of an outpatient occupation. Inpatient care was shrinking, and somehow expensive hospitals were swallowing their smaller (and less expensive) competitors. It wasn't a necessary development; Switzerland still favors small luxury "clinics" of ten or twenty beds, usually containing wealthy patients of a celebrity doctor. Local customs like this will change slowly. What America appears to need is more hospital competition and more ambulance competition; the two may actually be somewhat connected issues. For amusement, I once studied the patients in the Pennsylvania Hospital on July 4, 1776, when historical notables were congregating three blocks away. The diseases were remarkably similar to what is seen in hospitals today; problems with the legs, mental incapacity, major injuries, and terminal care. People are treated in hospitals because they can't care for themselves at home.

A BLUE-RIBBON COMMITTEE NEEDS TO STUDY INSTITUTIONAL COMPETITION IN HEALTHCARE.

This is a complicated issue and may take several years, or even several studies to sort out. What is useful for urban settings may be inappropriate in exurban ones; local preferences must be separated from special pleading, and that is not always easy. However, the continuing care center seems to be a permanent direction which is growing in popularity, as is also true of rehabilitation centers and retirement communities. Many of these institutions might incorporate doctors offices for their surrounding community, using the same parking facilities and many of the same medical specialties for both the neighborhood and the core facility. There seems no reason to oppose either rentals or private condominium-style ownership nor any reason to resist group clinics. Exclusive arrangements, however, are more questionable. All of these arrangements should be studied, and unexpected problems flushed out. No doubt the preliminary studies would lead to pilot and demonstration programs. And some practices which initially seem harmless, should in fact be prohibited. We have a lot to learn before we start overturning the existing order. But nevertheless, some arrangements will prove to be superior to others, almost all of them are regulated in some fashion, and the regulations should be examined, too. It should accelerate needed changes to know in advance which ones are ready to be tested, and tested before they are demanded.

*******

CCRCs

Everyone knows Americans are living thirty years longer because of improvements in health care, and some grumpy people are waiting with glee to see if Obamacare will put a stop to that sort of thing. It must be left to actuaries to tell us whether the nation saves money or not by delaying the inevitable costs of a terminal illness. But one consequence has already made its appearance: people are entering retirement villages in their eighties rather than their seventies. Presumably, people in their seventies are feeling too well to consider a CCRC, although other explanations are possible.

Accordingly, a great many CCRCs are seen to be building new wings dedicated to "assisted living". A cynic might surmise there must be some hidden insurance reimbursement advantages to doing so, but the CCRCs are surely responding to some kind of increased demand when they make multi-million dollar capital expenditures. Assisted living is a polite term for people with strokes or Alzheimers Disease, or some other condition making it hard to walk, or, as the grisly saying goes, perform the activities of daily living. One really elegant place in Delaware has suites with servants quarters, but for most people, the only affordable option is to be in a room designed around the idea of assisting an invalid. It's generally smaller and more austere but fitted out with railings and bars and special knobs. Meals generally have to be supplied by room service.

Not everyone is destined to have a protracted period of decline, but it's fairly frequent and universally feared, so it's a comfort to know your present residence is attached to a wing which provides for it. The question is how to pay for it. There are two main approaches currently in use, adapted to the limited financial resources of the aged and the particularities of CCRC arrangements.

In the first arrangement, there is no increased charge for moving to assisted living, which helps overcome resistance to going there. However, the monthly maintenance charge for others who remain behind in "ambulatory living" is increased, usually about 20%, to provide funding for those who eventually need special assistance. That's a financial pooling arrangement, sort of an insurance plan, and like all insurance, it has a tendency to increase usage unnecessarily. It also increases the cost to those who enter the CCRC at an earlier age, because they make more monthly payments before they use them. Although the monthly premium probably goes up as the costs rise with inflation, there may be some savings hidden in applying an earlier payment stream at a lower rate. That's called "present value" accounting, but like just about all accounting, its unspoken advantages and disadvantages contain a gamble on unknown future inflation.

In the other common financial arrangement, you pay as you go, when and only if you actually use the assisted living quarters. Because of the likely limit to resources, there is usually an attached agreement to garnishee the initial entrance deposit if available funds prove insufficient. The one thing which won't happen is being thrown out in the snow for non-payment; there's a law prohibiting that. Bigger apartments with large initial returnable deposits are of course better off paying list prices. Those with smaller apartments may have smaller deposits, and favor payment by a percent withdrawal. Some places haven't thought this through and offer no choice. In that case, more attention should be paid to those list prices and the percentage markup from audited cost. Better still is to have a free choice of both options, with cost transparency.

The remaining choice is between two CCRCs with differing options, made at the time you enter. The Obamacare fuss has made a lot of people acquainted with "adverse risk selection", which is largely based on the idea that an individual has a better idea of his health future than an institution does since that includes family history as well as earlier health experiences. But in general, a young healthy person is going to live longer without needing assisted living than an old geezer who going to need it pretty soon. A hidden adverse incentive is created for younger healthier people to set the choice aside, and come back in ten years, providing they remain alert to the underlying reason the monthly fee is then somewhat higher than in some competitive CCRC. At the far end of the age spectrum, an incentive is created to go into assisted living quarters a little earlier in life, generally regarded as an undesirable choice.

All this financial balancing act can seem pretty overwhelming to an elderly person who isn't entirely comfortable with the CCRC idea in the first place. Rest assured that everything has to be paid for somehow, and after you die you won't care what choice has been made. If you trust the institution to have your best interests in mind, the only consideration of real importance is whether your money will last you out. The institution cares about that even more than you do, so while they aren't likely to offer unrealistically bargain choices, they may offer a few which are too costly.

America has had a ninety-year romance with insurance because it is so comforting to be secure and oblivious to finances. This is just another example of the struggle between the search for a security, and the struggle to devise ways to pay for it. While no one can be positive about it, we're all in this together.

About half of the American public pays federal income taxes, and among the half who don't, a great many receive a green government payment check, meaning they have negative income taxes. The tax assistance companies, H. and R. Block and the like, had little for their offices and staff to do in January, February and March until someone hit on the idea of processing "fundable tax credits" for a fee. That is, the lower-income segments of the population get the promise of an April tax "rebate" as the consequence of tax-form preparation, so H. and R. Block just loans them the money, discounted for fees and interest. It keeps staff busy, generates revenue. Hardly anyone in the upper income half of the population is aware of all this, so there is little political friction. This whole system of income redistribution quite effectively keeps the two halves of the population sitting in the same chairs at the tax-preparation offices, but in different months of the year; one half getting paid, the other half coughing up the payments.

It thus becomes possible for two inflammatory slogans to bandy about, without starting fistfights or revolutions. The first was overheard at a local bank, one stranger remarking to another, "Has it ever occurred to you that taxes are a form of consumption?" To which the other person replies, "Yes, and taxes are the largest expenditure I make." A nation which once went to war over a two-cent tax on tea is remarkably passive about the ways things have evolved, but this essay is not devoted to unfairness. Prepare to hear how the upper income brackets might reduce their taxes, whether that counts as decreased consumption or not. Whenever you tax something, you get less of it; if you tax public income more, the public will earn less. So, this little essay is serious when it proposes that we all earn less, so we can get taxed less. And being taxed less, we need save less for our retirements.

The general principle is this: income is usually taxed in the year it is earned, with some exceptions, rebates and deferrals. The exceptional situations are often referred to as "loopholes" and therefore live in political jeopardy. However, if a person spends the money or dies while these deferrals continue to exist, the income may escape taxation entirely. In a sense, the largest loophole of all lies in the present fact that nearly half the population pays no income taxes at all, so saving income earned under those circumstances may lead to investment capital, which is later spent during highly taxed periods of that same person's life. Money earned by a child, usually on investments donated by a relative, is an example. Since at present, a child may receive annual gifts of $13,000 tax-free, as much as a half-million dollars can be accumulated in this way, always at the risk that laws may be changed and, further, at risk of spendthrift abuse by a psychopathic child. Whether these are wise risks for a parent to take, depends in large part on what sacrifices are made for the purpose, especially loss of parental restraint of unwise spending. A much more serious argument grows out of the possibility that money in the hands of children who lack experience in deferred gratification may actually provoke recreational drug use, or other sociopathic behavior.

Finally, lack of planning may create opportunities as much as planning does. A person who has paid little attention to financial planning may arrive at an advanced stage where life expectancy is considerably shorter. Savings at that point may be divided into money on which deferred taxes must be paid when you spend it, and money on which taxes have already been paid. More savings will be consumed if the individual triggers deferred tax liabilities, than if he just uses up money on which taxes have already been paid. Therefore, if he ignores lifetime habits and spends after-tax capital first -- the whole nest egg will last longer. But none of this deferred-income tax issue can compare with the problem of income on which taxation has been completely forgiven at the time it was spent, the so-called tax expenditures. The largest such tax expenditures are on the interest of home mortgages, on employer-paid (but not self-paid) health insurance, and employer-paid retirement income. Of these, the least consequential are the retirement income, because the tax is merely deferred, not completely forgiven. The two biggest items are home mortgages, which lie at the root of the 2007 financial crash, and employer-paid health insurance premiums, which triggered the Obama health proposal of 2009. The Obama plan purports to rein in health costs, but is estimated by the Congressional Budget Office to cost the Treasury $100 billion a year.

Extra! In the Fall of 2011, this boring matter suddenly came to the surface, in the form of huge American deficits threatening to bankrupt the country, as they were apparently actually going to do in Greece. As politicians do, many attempts were first made to rename the over-spending issue for partisan advantage. It was, for instance, tax expenditure. It was, possibly, a sovereign debt crisis. In any event, the Congressional Budget Office included such wealth redistribution under the heading of tax expenditure, which totalled a trillion dollars. Since everyone was searching for a painless category to eliminate in order to balance the budget, this term was hard to avoid. As far as Congress is concerned, the national deficit is whatever the CBO says it is, and in this case it lumped a lot of things together which politicians would like to split apart. When you take things in small pieces, it becomes possible to boil the frog by slowly heating it up before it realizes it is cooked. Lumping things together induces the frog to jump out of the pot, but however that may be, it has got lumped together by the referee of such matters, and there is a strong possibility it will stay lumped.

The essential point for accountants to focus on, is that tax expenditures are all counted as revenue when any non-accountant can see they are expenses. For political speech-making purposes, this distinction is vital and no opponent will let another politician wiggle out of it. And the beauty part of it is that it also spotlights three of the most besetting evils of modern politics: the tax exclusion of employer-based health insurance, the home mortgage interest tax exclusion, and the "earned" income tax credit. The first of these is responsible for our health insurance mess, and the other is responsible for our home mortgage crisis; the two main political problems of the day are suddenly plopped into the limelight, just when a lot of people are looking for ways to hide them. Furthermore, this bombshell was fired by a panel of the four outstanding tax economists of the nation, each of them roundly denouncing them as unthinkable ideas that never should have been born in the first place. Alan Greenspan, famous for unintelligible speech, simply said all of these tax expenditures, every one of them, should be eliminated immediately. One would hope that is clear enough. Martin Goldstein, formerly chairman of President Reagan's Council of Economic Advisors, agreed. As did former Governor Engler of Michigan, widely acknowledged to have rescued his state from impending bankruptcy. Senator Nelson, a Democrat from Florida and chairman of the committee, positively beamed with pleasure. It was hard to think this was anything but a turning point in history; let some political candidate disagree, and he can expect to have his audience shown a videotape of this succinct epic in the history of Senatorial hearings. These greybeards said, in what was obviously an unrehearsed moment, just eliminate these three terrible ideas in one stroke, and the national deficit will be reduced by a trillion. That's what they said, and it's easily proved that they had said it.

Any idea of a smoothly orchestrated introduction of the new law was jarringly interrupted by the U. S. Supreme Court, which granted a hearing to a complaint by 26 State Attorney Generals, that the ACA Act was unconstitutional. It was big news that the whole Affordable Care Act might be set aside without selling a single policy of insurance. The timing (before the Act had actually been implemented) served to guarantee that the constitutional issue, and only that issue, would be discussed at this Supreme Court hearing. By implication, there might be more than one episode to these hearings.

While many could have declaimed for an hour without notes, about difficult issues perceived in the Obama health plan, questioning its constitutionality had scarcely entered most minds. Then of a sudden, near the end of March 2012, a case testing the constitutionality of mandatory health insurance was granted certiorari and very promptly argued for three full days before the U.S. Supreme Court. Twenty-six state attorneys general brought that case, so it was not trivial. In jest, one Justice quipped he would rather throw out the whole case than be forced to spend a year just reading 2500 pages of it. But Justices are practiced in the art of quickly getting to the heart of a matter; it soon boiled down to one issue: was it constitutional for Congress to force the whole nation to purchase health insurance? Is there no limit in the Constitution about what the federal government can force all citizens to do, even though the federal government itself is severely limited in scope? Even though the Tenth Amendment states that anything not specifically granted to the federal becomes the province of the states? Would a people who fought an armed revolution for eight years over a 2-cent tax on tea, now consent to a much larger requirement which it was not constitutionally authorized to impose? Most people finally wrapped their heads around some formulation of this non-medical concept to a point where they vaguely understood what the Judges were arguing about. This was beginning to look like a topic where We The People made a covenant with our elected leaders, and reserve sole right to change it.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Tenth Amendment

The Constitution describes a Federal system in which, a few enumerated powers are granted to the national government but every other power is reserved to the state legislatures. The Constitution had to be ratified by the states to go into effect, and the states had such strong reservations about the surrender of more than a handful of powers that they would not ratify the document unless the concept of enumeration was restated by the Tenth Amendment. If states could not be persuaded of the need for a particular power to be national, they might refuse to ratify a document which enabled permanent quarrels about the issue. That wariness explains why The Bill of Rights goes to the extra trouble of declaring certain powers are forbidden to any level of government.

Separation of powers further explains why Mr. Romney's mandatory health insurance plan might be legal for the Massachusetts legislature, but prohibited to Congress. After Chief Justice Roberts got through with it, whether that truly remains the case will now depend on whether it is described as a tax, a penalty, a cost, or whatever, and only if the U.S. Supreme Court later agrees that was a proper definition. Because -- to be considered a tax it must be too small to be considered a coercion. The law itself apparently does not underline this distinction in a way the Justices felt they could approve. Indeed, while Mr. Obama in his speeches firmly declared it was not a tax, later White House "officials" declared it might be. There was agreement the Federal government could tax, but no acknowledgement that taxes might have any purpose other than revenue.

Under circumstances widely visible on television, however, it was clear that the House of Representatives had been offered no opportunity to comment on this and many other points in this legislation. To a layman, that fact itself seems as clear a violation of constitutional intent as almost any other issue, since the Constitution indicates no idea was ever contemplated that any President might construct laws, nor like the courts, interpret their meaning. The first three Presidents repeatedly raised the question whether they had the authority to do certain things we now take for granted. And Thomas Jefferson was similarly boxed in by a clever Chief Justice, who said, in effect, Agree to This Decision, or be Prepared to Get a Worse One. The Constitution says it is the function of the Executive branch to enforce the law, "faithfully". Presumably, all of the thousands of regulations issued by the Executive Branch under this law, must meet the same test.

Given that the Justices now hold it constitutional for the federal Congress to mandate universal health insurance, based on some authority within taxation, the immediate next issue is paying for it. Millions of citizens, usually young and healthy but sometimes for religious reasons, do not want to buy health insurance, and would be forced to do so by this law, because the only available alternative is to pay a revenue tax. The purpose of including them is to overcharge people who will predictably under-use community rated insurance, and thus enable the surplus to reduce costs for those who do want to buy health insurance. (Here, the Court had the pleasure of reducing an unusually opaque law to an unusually succinct summary.) To avoid the charge of a "taking", the Administration must either surrender on the universal mandatory point, or else surrender the level premiums of community rating. The lawyers for the complaining attorneys general laid great stress on this particular issue in their arguments, and it occasioned much of the discussion from the bench. However, until the law is in action there is as yet no cause for damages.

Here it will depend on whether you call it a permissible activity for Massachusetts or for the Federal government. The Constitutional point seems to be that it is a legitimate Federal power to tax for the "general welfare", so it now becomes essential to know if the taxes for noncompliance in Obamacare are really a penalty. The Justices seemed to be questioning whether the whole scheme would collapse with the forced subsidy eliminated, and because of that be deemed to have been a "general welfare purpose" adequate to meet the constitutional requirement of a permissible enumerated purpose. Lawyers can generally find such a defined purpose in the words of the Constitution, even if they have to dip into the penumbras and emanations of the words. So the question might just devolve into whether a majority of the Justices wish to declare the penumbra to be within the enumerated powers of Congress. To all of this, the lawyers for the attorneys general reply that such an enumerated power is impossible, because there is no limit to what could be done by this method. Congress would then be allowed to mandate that everyone eat broccoli for dinner, or buy a General Motors car in order to pay for the deficits of rescuing that company from bankruptcy. Almost anything could be mandated by establishing a penalty called a tax; including a mandate that everyone buy a product in order to pay for the deficits of mandating it, illustrates there exists at least one circularity of enumerating something as a power of Congress. According to this reasoning, mandated health insurance cannot therefore be an enumerated power of Congress, either now or at any time in the future. The sort of speculative law outlined in this paragraph is exactly the sort of thing the Supreme Court dislikes, and shows the utility of denying access to the courts to anyone who cannot claim "standing", defined as a claim of actual injury from a law.

The Justices undoubtedly had to weigh the fact that the American public has a strong distaste for this sort of convoluted reasoning, which sounds like a convention of Jesuit priests having fun. On many other occasions however, the public has accepted the judgment of people it hired to understand this sort of thing; that's called respect for the law. Eighty years ago in the Roosevelt court-packing case, there was the same sort of collision between the Court and the President, and the Court knuckled under even though the public supported the Court. In both cases, the Court seemed to be yielding to the President, with the unspoken compromise that the President would not pursue his earlier course with quite so much vigor. Since the really central 1937 question of overturning the Interstate Commerce clause ("Commerce among the several states") was left unaddressed, the velvet glove might yet contain an iron fist.

PRESIDENT George W. Bush nominated John Roberts to be Chief Justice of the U.S. Supreme Court in 2005. Since then, the Chief's administrative changes to the court and the whole court system have been slow but methodical. To the extent the Chief Justice has control of the matter, Roberts has been taking steps which make the Court into a more thoughtful branch of the Federal Government, ultimately making it more powerful. His first step was to reduce the number of cases considered each year, constraining them to conflicts between lower jurisdictions, unless otherwise mandated. This year, the number of cases heard is about eighty, or only half of previous numbers. The policy lets unconflicting Appellate judgments stand. A second court must disagree with the first one, for the Supreme Court to enter the case.

The so-called Obamacare case, (NFIB v. Sebelius), meets this conflict-between-jurisdictions standard, but is notable for other innovations. The case was nationally broadcast as a live slide show. It heard arguments lasting three days instead of the usual single hour, and of course it broke new substantive ground in a case of national interest. The decisions will now get more press attention; but this relatively rapid evolution toward a national debating contest, through modified Court procedure, is more important than it looks. It would be saying too much to claim the whole nation now fully understands its Constitution of enumerated powers, but surely the citizens who have only recently learned something about it must number in the millions. Before this case, many law school graduates might have had difficulty describing the design of the federalized system in a plausible dinner-table conversation. It's not yet clear where John Roberts is going, but he is surely trying to bring the public along with him.

During the semi-televised arguments, I was at first impressed with the rapid-fire exchanges between Justices and litigators about the operation of health insurance. Some people are born with high-speed brains and high-speed speech apparatus; no doubt, such people are sought after to represent others in court. But after practicing Medicine for sixty years and writing books about health insurance, I recognized that several rapid-fire responses by the attorneys were confident but off-target. Frankly, if you only have a few minutes but many points to make, and have to say them before someone interrupts, you would almost have to be a circus freak to manage. This is quite unnecessary, no matter how entertaining it may be to other lawyers. There seems no reason why the questions cannot be submitted in writing, sometimes employing experts on the specific points, and allowing enough time without interruption to devise a thoughtful answer. At present, it seems to matter more what the litigating attorney will agree to, than what is the fact. The outcome of cutting a litigant off after he says, "Yes, your honor, but.." is now only to establish whether both sides agree on a point; just why they agree or disagree is not even sought, let alone disregarded. It would seem useful to know Justice Thomas' reasons for abstaining from questions during oral arguments, for a different sort of example. So, it is easy to imagine that John Roberts has some thoughtful goals in modifying Supreme Court traditions, and equally understandable if jurists of this distinction become irritated by suggestions from the peanut gallery. It is thus fitting that we all hold back and first watch where the varsity means to take us. But allowing the public to express an opinion, is not the same as lobbying for it.

The Obamacare Act was about 2600 pages long, and two years after the President signed the bill, more than half of the necessary regulations remain to be written. The Law is "not severable", which is to say individual pieces of it cannot be attacked in court, without potentially upsetting decisions made on other portions. As a consequence, both the good and bad parts could endure for a long time to come. Or, the whole thing could suddenly sink from sight, relatively quickly. If the Justices can tolerate it, this legislation with many "moving parts" could be in the courts for a long time to come. So, Justices will then find the rule Roberts has made, of only accepting conflicts between the jurisdictions, protects their time and patience. But in doing so it will shift most final judgments into the hands of the lower, appellate courts. The legal profession will like this quite a lot. It will be like the gratifying situation said to prevail when a commanding General decides to retire -- everybody down the line could get promoted one notch.

By artfully selecting cases to argue, there were here four points open to decision. Only two of them eventually had bearing on the final outcome of this case, but the whole issue is not necessarily concluded. The first decision got most attention, deciding that the penalty for not having health insurance could be read as just a tax, and therefore was legal for Congress to use as a Constitutional basis for making health insurance mandatory, as Roberts declared the "Commerce clause" was not. The distinguishing feature of a Congressional exaction which is "just a tax" appears to be whether it exceeds the expenditure intended; if it exceeds the expenditure it would presumably be punitive. Nothing had seemed more important to the Founding Fathers than to expand the ability of the national government to impose taxes to service war debts. To truncate this wish of George Washington and Robert Morris into a short-cut, "Congress has the right to tax", or conversely to expand its confining language into "Congress has the right to tax in order to make private health insurance compulsory" just points up that the only real purpose of taxes in Washington's day was to wage war, and that the purpose of allowable taxes probably would have been defined if other purposes had been foreseen. Someone could usefully point out that what the Constitution really means is that Congress has the right to tax for "defense and the general welfare", and challenge anyone to argue otherwise. One sees the clever hand of Gouverneur Morris fuzzing up that argument; are we to ignore the fungibility of money and ask whether Congress may spend money on the general welfare only if it is general? How about earmarks, for example, are they all for the general welfare?

However, to turn a blind eye toward interesting issues is apparently a price that must be paid for obtaining the right for the Chief Justice to write the majority opinion, which eventually slips in some language (in legal language, an obiter dictum) to the effect that of course you couldn't use the Commerce Clause to do that. Getting Justice Ruth Ginsburg to sign that will eventually sound like the box John Marshall constructed in Marbury v. Madison. If that obiter dictum is as heat-resistant as the opinions of the first Justice Roberts in Franklin Roosevelt's court-packing effort, then the Commerce Clause is likely to be off-limits for a long time. Of course, if Chief Justice Roberts had joined the other four conservatives he would still have been able to write the majority opinion, but in the opposite direction. Except of course for that inevitable political accusation: There you go again, you 5-4 conservatives.

The second decision in this case is the sleeper. Congressional managers in charge of writing the bill had finally decided they had no way to cover 40 million uninsured people, except by diverting fifteen million of them into what is acknowledged to be the absolutely worst part of the American medical system, the state Medicaid programs. And because many States Rights advocates were in charge of state Governor's offices, the Congressional bill-writers added what is now a fairly familiar prod to cooperation. That is, if a state refuses to take the extra Medicaid patients, it will lose all federal funds for existing clients of state Medicaid. This sort of coercive provision has become so standard in highway bills and other federal programs operating at the state level, that it was largely unnoticed in the 48 hours the Congress was given to examine 2600 pages of legislative provisions. This however is blackmail, said John Roberts, quite unallowable under the defined separation of powers of the Constitution, between the state and federal levels of government. Furthermore, if some state decides to accept the penalty, it could close the existing program for the poor and accept the subsidy for the middle class, thus enhancing their revenues and reducing their obligations to the poor. Congress must now devise new strategies for suggesting federal programs to the states, and probably will do so. But the financial blackmail strategy now has a permanent black eye, with a skeptical public eye on the alert for it. The ironic conclusion of all this comes from the Congressional Budget Office, which predicts we will end up with 30 million uninsured persons, anyway.

What's awkward about this was immediately pointed out by attorney Richard Epstein: it ignores the century-old precedent set by Chief Justice Taft. Writing about a Child Labor law, Taft created a Supreme Court precedent that the Constitutional taxing power of the national government may not be used to implement what cannot be implemented directly. We can now see an example within the borders of a single case, where the Constitutional taxing power provision is usedto vindicate an otherwise impermissible Obamacare, and a few pages later its use is forbidden in the case of Medicaid in order to accomplish a forbidden coercion. Locating the two issues in the same case decision helps make the distinction between using the taxing power for revenue, and using it to coerce obedience; the distinction grows as the magnitude of the tax grows, particularly after it exceeds the intended government expenditure. What is not emphasized is the basis for Chief Justice Roberts reversing the precedent set by Chief Justice Taft on the same topic a century earlier. He did it with the Obiter dictum, and yet he didn't exactly do it. The four liberal Justices who co-signed the decision are not in a position to dispute it, while the four conservative Justices may not wish to. In either direction however, the vote of the current Chief Justice appears to be both decisive and subtle.

It remains to be seen whether the 'tax, not commerce' strategy was clever. If the tax approach proves to be durable, it presumably extends to a wide range of legislation since Roosevelt's New Deal. Already, its awkward features have emerged in renaming portions of Obamacare into Chapter 48 of Subtitle D of the Internal Revenue Code of 1986 (!). Any law student who tries to look that up is going to have a frustrating time. But on the other hand, sometimes you win by losing. If it should somehow not be a tax, it has already been excluded from the Commerce Clause, so it has no hook left in the Constitution on which to hang it. There's something in this whole wrangle which resembles the position of Germany and Japan after the Second World War. In spite of losing that war, those two nations seem to have prospered better than England and Russia, who lost their empires but are said to have won the war .

The Attitude of Big Business. In order to preserve maximum flexibility as long as possible, many important features of the Affordable Care Act (Obamacare) remain unrevealed, and some are perhaps still unsettled. Furthermore, attitudes change with experience. At the formation of the Obamacare idea, the leaders of big business (at the time) were more concerned about foreign competitors than about employee attitudes. The traditional goal of a "level playing field" led them to favor an employer mandate to provide employee healthcare. It probably was presented to them that they could only have their desires by agreeing to a universal individual mandate for everybody. Although it was uncertain whether the employees would agree, universal was the price to be paid, and they paid it. Whether new leadership supports this compromise or not, it is generally assumed that big business feels obliged to support Pete Stark's universal mandate until it is tested. Only time will tell whether businesses will withdraw their support in the face of events, but fragile beginnings certainly do not assure permanent support. Since it was the withdrawal of this group's support which destroyed the Clinton plan in 1994, a significant issue hangs in the balance. Therefore, when conflicts were discovered with the ERISA laws under which big business works, the inclusion of big businesses in the framework of the Affordable Care Act was postponed for a year. How it will emerge next year or whether the ACA can survive for a year without major business inclusion, both remain to be seen.

The Rising Voice of the Uninsured. A financial recession usually increases the number of health uninsured, but at present unemployment is slowly falling. However, decades of scientific medical advances are not only extending longevity but reducing non-fatal illness among the young and uninsured. Although it is unclear whether youthful perceptions match the actual changes in their morbidity, young healthy people who rebel at paying health insurance premiums may actually increase in number substantially during the coming decade. Although overall inflation has been moderate, discomfort from competing costs of college debts and items such as gasoline have escalated. When the Affordable Care Act is fully implemented, youthful perception may make the first serious test of its usefulness. Those among them who actually get sick may get an opportunity to sample Medicaid and report their experiences to their friends. To some extent, this will be a race between efforts to improve Medicaid in order to forestall complaints, and the tendency of young people to try to get their way by pounding the table with their shoe. If successfully managed, it could promote some badly needed improvements in Medicaid. Handled poorly, however, it could bring the program down.

Cost of the Program. The fact must be squarely faced that insurance almost always increases costs. That is true of all casualty insurance, whether auto, homeowners, or maritime. Correctly applied, it can indeed redistribute costs, but insurance imposes extra administrative expenses, and it produces "moral hazard", so total costs are increased by insurance. Moral hazard is a term of art, signifying that nobody spends someone else's money as carefully as his own. Actuaries calculate the extra cost imposed by present American forms of health insurance to be at least 30% of the total service, and arguments can be made it will be so much more, that level historical costs cannot conceal the appreciably higher premium level. Longevity is improved by reducing the number of brushes with life-threatening illnesses in a lifetime; costs go up because prices go up.

Universal coverage now introduces its own uniquely unwelcome issue, that eliminating non-insurance market benchmarks for medical prices also eliminates the cost guidance they formerly provided. Crippled though it may have been, the partial cash market did set benchmarks, if not prices, which insurers then had to match -- and those benchmarks will possibly soon be seriously diminished. That development will be welcome to those who wish to receive higher prices, but cause dismay among those who have to pay for them. The result is predicted to lead to price controls, which will, in turn, provoke shortages, possibly demonstrations or worse. Matters may not follow that path, but it is hard to see why not. As to any reduced overhead like marketing costs, employer-basing has already reduced them to a small opportunity for streamlining. In the past, a resort to price controls has almost invariably led to shortages. Even in 2013, there have been shortages of cancer drugs, an almost unheard-of event in the past century.

To put it mildly, rationed healthcare is politically disadvantageous for those who attempt to enforce it. The most conservative projections now suggest that Obamacare will increase healthcare costs by 22%. Since the following proposals would by contrast almost surely reduce costs by a conservative 30%, it is not impertinent to suggest that no matter remains closed while a 50% overall cost swing remains credible. That would be particularly true when it concerns 17% of gross domestic product (GDP) during a recession. In fact, no one has even contemplated what it would mean to inject 5% of American GDP back into the world economy, especially by the mechanism of releasing a paralyzed medical system.

Patient Participation

Patient Participation in Claims Costs, Generally Speaking. For the insurance industry, this is an old story. Industry survival has depended on success in answering it effectively. In health insurance, the traditional approaches have mainly been 20% co-pay and about $500 annual deductible. The first means 20% of all benefits cost, the second means the first $500 of benefit costs in a year. These figures evolved out of countless negotiations between labor and management, or within legislatures, are now accepted as traditional, and are accepted by the public. These figures also represent how much each side thinks it can afford since they see themselves as ultimately paying the bill. Until recently, however, patient participation at such small levels has not reached a point where it significantly influences patient behavior, which is set by entirely different forces and is now the main long-term cause of healthcare cost inflation. As mentioned above, business negotiators seldom pay much heed to imposed costs, just so long as their major competitors must pay the same costs; in fact, that is one of the flaws in our corporate system. However, governments as third-party payers enjoy no such luxury, and most of the complaining about healthcare cost inflation has originated with governments. Consequently, businesses not infrequently drag governments to higher cost levels, and this must be recognized as a reality of entitlement programs. Furthermore, attempts at raising patient cash contributions have always had political rather than economic origins, usually loudly characterizing any cost constraints at all as crippling the intent of insurance, making false promises, and depriving the poor of humane treatment. If patient contribution ever reaches 50% of costs, the program will likely be called a failure (Insurance exchanges please take note.).

However, it would appear incentives cannot affect overall patient behavior very much until patient payments to reach a much higher point, and we may well see some experiments to test what that level may be. (As it is argued here, this dilemma need not be completely dispositive.) More recently, steadily rising healthcare costs have actually led to employer increases in co-pays and deductibles, and the Obama administration has been giving signs of yielding to the behavior modification argument. However, these approaches cannot be called a success until they seriously reduce long-term healthcare cost inflation, and that remains a doubtful outcome.

In fact, no desperately sick patient should ever be expected to pay much attention to costs. The restraint of partial cash payment should be reserved for lesser conditions, and even provider discipline should be reserved for what are provably individual provider decisions, whether at the institutional level or the professional one. There are certainly broad areas where no patient cost restraint whatever can be justified, and program design should recognize that premise. Nevertheless, much more could be done with patient participation in costs than is done at present.

Cost Restraint

Targets for Cost Restraint Requiring Two Distinctive Approaches. There are two factors in overall medical costs: the item price, and item volume. Above a certain level of sickness severity, only item prices can be legitimately constrained, not the volume of service. Before any of that happens, of course, all published prices should be audited and forced to conform to standard cost-to-price ratios, because cost-shifted indirect costs are so prevalent. For minor conditions and illnesses, volume control on the patient remains legitimate, particularly for conditions where patients are usually responsible for inciting them. Patient cost-sharing is, therefore, a legitimate out-patient approach. Officials given the right to set such boundaries will almost surely be assailed as having a conflict of interest, or untrained for the decisions; it is an unpleasant role, attractive only to unpleasant people.

The healthcare market segments itself into two quite different approaches and successful administration consists of accurately distinguishing the two. As soon as the patient enters a hospital, his control of cost creation is taken away along with his clothes. Therefore, payment by diagnosis is a sensible approach for inpatients and could be even more effective if the diagnosis codes were revised to include greater stratification by the additional use of laboratory and other billing sources as confirmatory evidence. An argument can be made that fee for service to a helpless patient operates without cost resistance. But having removed incentives for abuse, the laboratory data becomes even stronger evidence of underlying diagnostic distinctions. Since Obamacare has apparently not fully examined such distinctions, there remains hope it can be persuaded to see the codes need expansion. At present, DRG codes are very crude and rely heavily on errors on the high side canceling out errors on the low side. Furthermore, they are derived from (ICD), the International Classification of Disease, which identifies individual diseases only if they are common, responding to the needs of medical records librarians who complained that usage did not justify the effort of coding every case. This combination of short cuts and errors is too crude for the advanced use now planned for them and would benefit from substituting the coding system called SNOMED3. A case can be made for both lumping and splitting; perhaps two codes are required, a crude one derived by computer-lumping precise ones of the same average cost -- rather than by similar etiology. As matters now stand, teaching hospitals have no way to assert a need for greater reimbursement for greater case complexity, specialty hospitals are able to select inexpensive cases within expensive categories, and rural hospitals are left without satellite cash cows.

However, this is tinkering around the edges of volume measurement. Much greater savings are immediately possible from attention to prices, through billing for direct and indirect costs separately, recognizing indirect costs as the present main locus of cost-shifting. Some serious thought should be given to the growing shift of profitability to the outpatient area, with inpatient care transformed into a loss-leader. As that is increasingly true, it becomes wiser to shift attention to the prices of outpatient and emergency room services. Going all the way to Health Savings Accounts would be ideal because it enlists patient incentives to the side of prices restraint. HSA also comes inherently segmented, between outpatient and inpatient hospital. Beyond segmenting price and utilization controls, however, consideration should also be given to segmenting health insurance itself, to match natural cost segmentations. Prison inmates, persons mentally impaired, and illegal immigrants account for nearly 30 million persons, and require specific ministrations, not patchwork exceptions to what the rest of the population requires.

It has to be noticed that developing lifetime health insurance is hampered by the considerable pregnancy and newborn costs which intrude at the beginning of the earning period from ages eighteen to forty-five. Otherwise, there is a reasonably manageable medical cost at the end of life, potentially preceded by a long period of negligible medical costs where compounded interest could be at work. So the thought naturally arises we might somehow pay for pregnancies in some novel way, essentially borrowing those costs against the future. What's involved here?

Instead of taxing each affected individual working person to subsidize his newborns and terminal care, the necessary subsidy could take place between three insurance plans, assuming the three costs to fall in separate insurances. Everyone owes a debt for being born, and everyone needs to save enough for getting old and dying. Society's benefits and costs of having children are not confined to those who have children. An unhealthy incentive to delay the first child has been created by paying for pregnancies this way, spreading the consequences to higher education and disrupted careers. Instead of regarding neonatal care as an expense of pregnancy (which we currently regard as part of the mother's health cost), just reverse matters, and include pregnancy costs as part of the baby's own debt for being born. Any move assigning pregnancy costs must somewhat fudge the transition cost of getting born without paying for it, or even asking for it. Attitudes depend to some degree on whether people generally want children to help on the farm, to help care for their own old age, as an entertainment or plaything, or accidentally. The theoretical fact is that pregnancy costs might be judged fairly split between the child and his parents, if it were only practical to do it. Once those practicalities are addressed by covering the first and last years of life with entitlement, transfers become relatively easy. If we must have entitlements, birth and death are certainly inescapable ones.

Unfortunately, once the finance is made practical, other issues assume greater importance. Science is beginning to make single parenthood more feasible, while easy divorce makes multiple parenthood possible. Easy sharing of the costs could reasonably be resisted as a moral issue we never had, and now don't need. The longer you live, the more interest you earn on those first 26 years. But the longer you live, the more medically expensive you become, toward the other end of life. There is still a great deal of argument about what is a fair division, and much time will elapse before final resolution can be considered a settled matter. But ultimately, serious savings could occur from keeping the first and last years of life in mind as the only universal medical costs, extracting maximum savings as one argument for choosing accounting tricks to settle the pregnancy part of it. What would be left would be accidents and occasional health calamities, which paradoxically are the only parts of current health insurance which truly fit the current insurance model.

Let's give an example. Lifetime health expenses are said to be somewhere around $300,000. If you have $40,000 in a Health Savings Account on attaining the age of 65, you can passively achieve $300,000 by age 86 (which we we hope is at least average life expectancy) by letting the HSA grow untouched. In this example, all other sources of health insurance revenue are available for other purposes -- they are the the "profit" from using compound interest, but it is unnecessary for that to be exclusively the case. Now, the problem transforms into achieving $40,000 by age 65. That could be reached by investing $150 at birth, or $2400 at age 26. Both are achievable, neither is easy.

But it's nice to have some choice, which including the first 26 years will give you. You can even do it twice, once in the child's account, and secondly in your own. My guess is that about a third of people could spare $40,000 at age 65 right now, trading a single payment for Medicare for its present wobbly finances. With overlapping populations, 2/3 of people could afford to spare $75 from each parent of a newborn, or $150 for a single parent, in return for eliminating the obstetrical premium within their health insurance. Considering the problems of young parents, some might prefer to combine $150 with $4800 for both parents at age 26 into a financing package of $4950 spread over ten years, from 26 to 36. But notice it gets harder, the longer you wait. Finding $80,000 for both parents now aged 65, gets really hard to do, but at least the child is all paid up. If you wait, it gets pretty hard to do this without extending the retirement age to 70, sacrificing five of your thirty years of retirement, but reducing the amount you need to save by about a sixth. Nothing like these choices would be readily accepted. But the policy axiom remains: the younger you start, the easier it is to stretch the distance. And the more attractive it becomes to treat some or all obstetrical costs as the responsibility of the person getting born.

Before concluding this approach is impossible, try to remember it is quite unnecessary to make lifelong healthcare free to the last penny, although some will demand it. In fact, first-dollar coverage (i.e. making all healthcare seem free) is a big part of what got us into this mess. If we only achieve a quarter or a third of this promise, the national aggregate would amount to a stupendous amount of money. A more realistic goal might be to reduce projected medical costs by a third, offset another third with investment income, and pay a third in cash. All three of those approaches seem comfortably achievable.

As this chapter is being written, Obamacare has been struggling for three years to achieve its twin goals of reducing the cost of medical care, while improving its quality and scope. The public has long been sceptical that the two goals are incompatible. During those three years, we have achieved a cure for Hepatitis C. That cure will save millions of lives and eventually the costs will decline. In time, the public will be able to see the difference between the results of the two approaches. During that time, biological science has discovered the relationship between sleep and the circulation of spinal fluid through the brain, probably the greatest advance in physiology since Harvey discovered the circulation of blood in 1628. In another field, Joachim Frank has identified the function of the Ribosome, making strips of protein the way a zipper works, and very likely the step at the beginning of cellular life, operating at room temperature and without caustic chemicals. These three discoveries are surely less than 1% of the scientific advances of the last three years, giving promise of vast advances in the cheap production of protein drug therapies, saving of lives, and ultimately the extension of life expectancy at lessened cost. During those past three years, what has Obamacare accomplished, at enormous cost, and widespread turmoil in the medical system?

As we approach the elections which will serve as a national judgment on Obamacare, it still remains difficult to say what it is. It clearly will raise costs, not lower them. It will extend a few subsidies to people who were uninsured, but the subsidies could have been extended without so much uproar. In any event, a number of people will have worse insurance after the dust settles. A regulation factory has been established, pumping out confusion, but changing comparatively little after three years of trying. It begins to seem incredible that there is so little to show for so much uproar, and there is room to doubt anything dramatic will emerge so late in the process. If the goal is to establish a regulation factory to shift control to the regulators, the public is quite right to ask what good will come of that; at the present rate of revelation, the eventual product will just be an expensive nuisance. So it seems fair to compare the final product with the Veterans Administration health system, which has been operating on a large scale for more than fifty years.

The Veteran's Administration health system is in the news, finally. Perhaps we should examine what is the matter with the VA, as at least a source of ideas about the forces which hem in any government health system. For example, whether it is a municipal, state or federal hospital system, it seems to be much better at constructing new buildings than maintaining them. Perhaps it is time to convene a study or a series of studies to address this discrete issue. Why is the system of control by budget relatively successful in an environment of designing and building a project, and so unsuccessful in running it?

Second, is there an inherent problem in setting the rules by the Congress or Legislature, instead of an appointed board of overseers? No doubt, there is an occasional abuse of power by a trustee of any organization, but lower-level administrators do not act as though this a big problem for them in private institutions. So what is it about governance by politicians which encourages the endless intrusion of politicians into the admissions, purchasing methods, hiring and disciplining processes of public hospitals? Does it make a problem to have control at the highest level be unified in a Congress or City Council, or is it the other way around, with too little authority vested in the operating divisions? Every administrator complains about staff physicians intruding into daily operations, but is it possible that the public institutions have gone too far in hierarchy, or else possibly not far enough? Most physicians hate administrative work, allowing a few tyrants to emerge, who do like it. When these would-be dictators are in administration because they are poor physicians, trouble is almost inevitable, and it cannot be improved by giving the power to nurses, pharmacists or other professionals who are normally lower in the pecking order than the professionals who now report to them. There is no good substitute for physician control, but what if all the physicians in a health system would rather quit than do administrative work? Maybe, just maybe, the private sector has something to teach us in this delicate issue.

To go on, politics may play the same disruptive role as professionals harnessed as administrators. Administrators detect and quickly resent a Union or American Legion official placed in a role which can disrupt the official power structure, just as if a pharmacist were appointed, or a nurse practitioner, or even an eminent neurosurgeon.

Finally, some new title should be applied to the type of corruption which is seen when union officials get their way in disrupting the day to day business of a health system. Quite recently, I was forced to hear the Director of local city Veterans Affairs say to an open meeting of strangers that he was totally and permanently disabled with a service-connected disability, and also working full time for $50,000 a year. Furthermore, he had recently declined an offer to work at a higher government level, at $200,000 a year -- plus, of course, his 100% permanent disability payments. There is more than a small chance he was making some exaggerated boasts, but even so it is appalling to hear such indiscrete remarks being offered, without the slightest sign that he recognized the revulsion such remarks made on his audience. It seemed obvious to all of us that he heard such remarks so constantly, that he regarded such politics (new word needed) as reflecting a normal, legal and desirable state of affairs. If Obamacare contemplates anything approaching what seems to be the normal attitudes prevailing in the VA, it really will not matter much what is written in its regulations. In defense of the VA, a more compassionate history may reveal a plausible explanation.

It is my view that Congress is more responsible than they themselves realize, and the problem is worse than we think. Things have been trending in the present direction for fifty years, but
the adoption of the DRG system of hospital payments came along in the 1980s. It was a brilliant rationing system, but it did not work well in Psychiatry, where the diagnosis has little correspondence to the cost. After a few convulsive experiments, Psychiatric hospitals were offered a payment system so unsuitable they could not exist with it. One by one, inpatient psychiatry disappeared no matter what the patient's finances were, and there is really only the Veterans System left. The situation was so egregious that admission officers simply ignored any rules which prevented admission of a case which clearly needed it. The distinction between service-connected and non-service-connected was most readily shoved aside, since humanitarian and medical urgency so clearly over-rode the rules. After twenty years, the disregard for administrative admission rules spread out to almost every condition, and it is going to be very hard to put the genii back in the bottle, when so many involved participants never wanted such non-medical constraints, from the very beginning.

Building a network of modern buildings in every section of the country, running an organization dominated by unions and their counterpart the American Legion, within a system which most doctors in the country avoid if they can, the VA is a quiet disgrace, slouching along for half a century. The underfunding, the political favoritism, the squelching of pride and achievement and the waste, are all about what you would expect from a union-dominated or politically dominated system. But most disheartening is to watch reform efforts squelched. Under the leadership of Dr. Dan Blain, a system of Dean's Hospitals had been created to infuse the high standards of neighboring teaching hospitals into what seemed like systems similar to ward medicine, reformed by the Flexner Report in 1914. For a few years, it seemed to be working, but in time the financial ethics of teaching hospitals seemed, not to raise the standards of the VA, but to be dragged toward imitating their behavior. The medical school doctors assigned to VA hospitals served out their time, then agitated to be transferred back to the teaching hospitals, with difficulties in replacing them with the same quality, slowing winning. When you begin to see elevator operators running the self-service elevators, you can be pretty sure the administrators have lost the battle. There are, thank goodness, plenty of exceptions. But nobody seriously expects them to change things very much. If you like what you see at the VA, you are going to love Obamacare.

Millions of people were unexpectedly canceled by health insurers at the onset of the Obama Insurance Exchanges. The President repeatedly told the public under Obamacare they could keep their old plans if they wished, even after notices to the contrary were mailed out. Insurance spokesmen firmly responded that the terms of the law required they could not keep the old plans for a single day. This promise was reinforced by the original section 1251 but later amended in confusing ways. The public had been told nothing like that during a three-year opportunity to be open about it; in their view, it was sprung on them. Maybe they had even been lied to; more likely, someone objected, causing revision that could be interpreted in several ways. In any event, postponement of the large-employer plans made it moot for the customer but not for the voters. To quell the uproar, the President quickly delayed the cancellations for a year, then extended the suspension, and soon provoking alarmed announcements from the insurance industry that such insurance would lose money. It suddenly became a question whether he could make the insurance companies take them back, and some said they wouldn't, even for just one year. It all sounds like an uproar on the other side of the curtain. The irresistible conclusion emerges there is more to this arrangement than is revealed, with further surprises to be feared. After all, the old rates had been set by the insurers, so something extra must have been added by someone else, but possibly it triggered some clause in the risk corridor provisions. Long accustomed to caveat emptor from salesmen, the public will have trouble getting over the assumption that insurers had been promised more expensive products to sell, in return for doing something of value for the Obama administration we haven't yet learned about.

In a world long accustomed to government anti-trust constraints, that higher prices with less competition could be mandated by law was almost too good for insurance companies to imagine. But now, after the deal is suddenly "postponed", any other industry groups who may have negotiated secret accords, are warned of the price: they must expect to absorb some costs whenever this President is forced to abandon his side of a bargain. The National Journal recently quoted an interview with an insurance lobbyist that large amounts of insurance money helped finance Tea Party meetings, suggesting internal dissension within the industry.

In any event, the canceled policies were almost entirely individual policies in the end, and the ultimate goal is speculative. A different way of expressing the thought is, a large collection of individual policies can more easily resist pressures to cross-subsidize other favored clients. One thing is almost uniformly true of persons who hold individual (as opposed to group) policies: they pay for health coverage with after-tax dollars and therefore are out of pocket by 20-30% extra for equivalent insurance. Many of them may well resist higher-priced products for that reason. Eliminating individual policies would cost the government considerable tax money and indirectly raise premiums. There must be some other motive for animosity toward individual policies, but we will have to wait to find out what it is. It may be just as simple as reducing the visible cost gap between the old system and a new one.

It's hard to believe any problem could be too big to solve, just as it boggles the mind to think of a corporation too big to fail. But if we say the same thing often enough, we come to believe it. People who tell you Medicare is the third rail of politics, are mostly telling you they hope so.

Lyndon Johnson, Wilbur Cohen, and Bill Kissick did indeed bite off more than they could chew, but Medicare really isn't that complicated. It amounts to taking the employer-based health system floating on an enormous tax deduction and substituting three ways to pay for it. The first was to charge premiums to the old folks, which wasn't enough, only covering about a quarter of the cost. The second was to apply a 3% wage tax to younger working people, called a payroll withholding tax, which prepaid another quarter of it, by means of a gimmick called "Pay as you go". And the third, which amounted to half the cost, was supplied by taxes. The year 1965 was the time when the post-war balance of American payments turned from positive to negative, and there was something called the Vietnam War to be paid for.

So after a while, the national budget had to be borrowed, and after the manner of governments, it was borrowed by selling bonds. The largest purchaser of 10-year treasury bonds is China. So, in a general sort of way, half of Medicare is borrowed from the Chinese, and half is paid for by the clients. The debt service is temporarily bearable, but eventually, it must be confronted, and China may have to choose between absorbing the costs or going to war. Our own choice is between kicking the can further down the road, or having the confrontation right now. That is to say, right now there is time for a long-term peaceful solution, but if we delay much more, that option will disappear.

I don't plan to run for office, so let me make a proposal. Instead of continuing the pay as you go system, the withholding tax receipts should be deposited into the Health Savings Accounts of individual citizens who earned them. They should be invested into inexpensive total stock market index funds, redeemable on the employee's 65th birthday or whenever he joins Medicare. That is, redeemable by Medicare, with the residual redeemable at the death of the subscriber. The wage owner would scarcely feel the difference, but the growth of the funds would be substantial. With luck, it would pay for Medicare's deficit of 50%, putting a permanent end to Chinese borrowing, but probably not much more. It would not, for example, pay for existing debt, or retirement costs. Remember, retirement costs are legitimately regarded as a natural outgrowth of Medicare's prolongation of longevity.

The invisible costs of Medicare would eventually be paid for in two other ways: the J-shaped costs of Medicare in the last four years of life, and the contingency fund.

J-Shaped Curve All healthcare costs with the exception of premature birth, genetic disorders and the like, are migrating to older age groups. One of the main causes of disruption is the migration of costs from working people to people on Medicare. But within Medicare, costs are also migrating later in life. Half of Medicare costs are paid for the last four years of life. Since Medicare extends twenty years and growing, half of the total Medicare cost would disappear as a result of lifting this burden and placing it somewhere else. This is called the Last Four Years of Life Reinsurance, one component of the First and Last Years of Life reconstruction of healthcare finance. It will be discussed separately in later sections of this book, but a vital point is removing the cost of the last four years of life, which constitute half of Medicare cost. The consequence is to cut the remaining cost of Medicare in half, potentially funding half forward, half backward.

The Contingency Fund at Birth. And the half which is funded forward can be further reduced by investing at birth and earning investment income for eighty years. By adding the withholding tax receipts from age 25-65, the combined fund can probably pay for Medicare. Just to be certain, a contingency fund could be added at birth, amounting to around $100 at birth and growing to $25,600 at age 80, or other variations of the 256 to one ratio. We have alluded to this concept in other areas. Its power concentrates in the nature of interest rates as well as principal to concentrate at the end of debt. That is, they rise at the end, and prolonged longevity takes advantage of this fact, parallel to the tendency of healthcare costs to rise at the end of life.

For the purpose of the reader following this without a calculator, take the happenstance that money invested at 7% will double in ten years. In nine ten-year periods of extended longevity, the money will have nine doublings (90 years). Follow the bouncing ball: 2,4,8,16,32,64,128,256, 512. In ninety years, a dollar turns into 512 dollars. If the family of a newborn, or in the case of poverty the government, deposits a dollar at birth there is a 500-fold increase at death at 90. There is no sense in being more precise about all the variables in a century, and many people are more skillful than I in manipulating them. But if to this is added another doubling, the ratio becomes 1024 to one, achieved by not liquidating the fund until ten years after the death of the owner. (This feature is added as a safety-valve.)But after the most sophisticated manipulation, it is safe to predict this outcome: The revenue would exceed the need in the last four years of life, even if the seed money turned out to be a hundred times the dollar postulated in the example. There would almost surely be money left over at the end, which might be used to supplement Social Security, although we suggest funding children as preferable during the transition phase.

So that's how you could restore Medicare to some sort of solvency, plus something left over for other purposes.

Headlines in the Wall Street Journal announced collapse of Congressional healthcare reform. In the same edition, a small short article buried in its depths described a possibly major step toward its reform. Martin Feldstein calmly observed, a tax exemption for healthcare insurance of 2.9% really amounts to a wage increase whose elimination might go a long way toward paying for the eighty-year mess Henry J. Kaiser had created. (In fact, it was effectively taxable income of 4%.)

It was all so simple: healthcare extended longevity, created thirty years of new retirement cost. In turn, exempting the premium for healthcare became a tax-exempt increase in wages -- for the 70% of employees getting insurance as a gift. Maybe not at first, but wages adjust to expect it during eighty years. Social Security could not cope with an extra thirty years, so SSA was going broke, while health insurance was actually the main cause of increased longevity.

But notice how unused Health Savings Accounts automatically turn into retirement accounts (IRAs) for Medicare recipients. So if you are lucky and prudent with healthcare, or if you overfund an HSA, unused healthcare money makes a reappearance in retirement funds where it belongs. If you have used up the money, you have probably been sick, and maybe won't need so much for a shortened retirement. Increasingly, expensive healthcare hits the elderly hardest, so there are many years during which compound interest overcomes inflation. At the rate things are going, retirement may become four times as expensive as Medicare, so let's consider that future.

Medicare doesn't save its withholdings, it uses "pay as you go" and spends the money on other things, like battleships. Therefore, to make any use of this windfall, it is necessary to save it, invest it, and use it for retirement. Just doing that much might redirect the other 30% of the withheld tax to its intended purpose. So the economic effect would be considerable, just by stirring around in that corner of it.

Community Volunteers in MedicineA little group of medical volunteers in Pennsylvania's Chester County may not understand the underlying issues very well, but they just pitch in and do what they can about the medically underserved.

Perfect, the Enemy of GoodHealth insurance to cover absolutely everyone is admirable, but may also be an unachievable digression from less glamorous but achievable reforms.

Replacing Employer-Based Health Insurance Employer-group health insurance will surely decline because so many are dissatisfied with it. That's just griping: a better reason to replace this system is to make way for better approaches -- if you know one. Even with a better system, we had better replace the old one gradually.

Reforming Health Reform, New Jersey StyleU.S. Representative Robert Andrews (D, NJ) had a night he won't soon forget on August 24, 2009. Facing 3000 constituents angry about Health Reform, he practically had a public stoning.

Time To CareA physician who practiced for sixty years, before and after Medicare, has a lot of stories to tell about how Medicine has changed and been changed.

Political Parties, Absent and UnmentionableOur Constitution is much praised for exquisitely balancing power between the three branches of government. It would even be an achievement to require two centuries to find a way to unbalance them..

Roberts the SecondChief Justice John Roberts seems to be intent on radical changes to the Supreme Court, made in a conservative way.

Looming Early Issues in ObamacareObamacare is constructed from the regulations issued by the Secretary of Health and Human Services. They respond to the laws passed by Congress which were two thousand pages long. After two years, only the outlines of this program are known. What are the looming issues?

Higher-cost Health Insurance is What's MandatoryCancellations of millions of health insurance policies show the Affordable Care Act aimed to mandate a few specific types of policies, and not merely to the uninsured. Without a government subsidy, most plans would cost more. The promise that you can keep your old plan, and keep your doctor, was an empty one.